With the BOE and ECB interest rate statements lined up for today, the EURGBP pair should be an interesting one to take a forex trade. On its longer-term time frames, it can be seen that the pair is forming a descending triangle pattern and is currently testing support.
A neutral to hawkish BOE bias combined with a very dovish ECB statement could lead to a forex trade downside break of .7800 support and further losses until the next visible support zone at the .7000 major psychological handle. On the other hand, a relief rally for the pair on lack of dovish ECB rhetoric or a very dovish BOE bias could lead to an upside move until the .8200 major psychological resistance.
EURGBP Forex Trade Setup
The shorter-term 100 SMA is still moving below the longer-term 200 SMA on the daily time frame, which suggests that a forex trade downtrend is brewing. However, stochastic on the same time frame is starting to move up from the oversold area, indicating a pickup in forex trade buying momentum.
Consolidation is also possible as traders might rather wait for the BOE minutes to be released before taking action on the pair. After all, the central bank has been switching its bias from time to time and it might be more prudent to see how policymakers are assessing the economy before taking any directional biases for pound pairs.
A sell stop order below the .7700-.7800 major psychological support zones might be safe enough to catch a potential drop and avoid a forex trade fakeout. Bear in mind though that these events tend to boost volatility so price action might be a little choppy during the time that Draghi holds the press conference.
In any case, it appears that the path of least resistance is to the downside, as the ECB is way more dovish compared to the BOE.
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