Is the #EURGBP trend going to continue short?
Or is the trend at an end?
In this video, we identify what could happen next on the forex pair and why the retail sentiment could give us a clue to the next move.
Hi, and welcome to this Blueberry Markets video update with me, John Kibbler, Head Currency Analyst.
In this video, I’m going to go through EUR/GBP as we could see a slight change of trend.
The reason I like the opportunity of selling the GB Pound is because of what we’ve seen in the currency strength.
We can see that the market topped out into the plus sixes. This is usually an area of reversal for a currency strength, and we can see that is exactly what happened here.
Ever since we hit those high levels, we’ve started to see the GB Pound weakness coming through the markets. This made me look at GB Pound pairs for potential opportunities.
One pair that looks good is EUR/GBP because we’re down at some key supporting levels.
We can see that EUR, although it took a slight dip last week in the current strength, has been moving to the upside. We could still see some of that come through in the markets.
Another reason why I like EUR/GBP long is that I like GBP/CHF short. You can see that the Swiss Franc is gaining there as well. Typically, GBP/CHF will move to the opposite direction of EUR/GBP. So, if I’m expecting movement on GBP/CHF, we could be looking at EUR/GBP movement as well.
For me, looking at EUR/GBP is a good idea. It’s not just from the strength and weakness point of view, but to also get an overview of the market.
We can see that the price recently came back into this double-bottom neckline area, which is a decent supporting area at the moment.
You can see that the price double-bottomed back at the end of December 2019 through early 2020. The price formed this large double-bottom, then the price broke to the upside.
Now, we’ve seen a retest of this neckline area. I would have expected a reaction from this point. We can see that the market has been straight-lining towards these points; showing us that the GB Pound has been very strong recently, and it’s pushed EUR/GBP prices a lot lower.
This, to me, gives me an opportunity to say that we have an aggressive move. The market could be in an oversold condition or coming into a place of exhaustion from this. We could start to see a little bit of upside. But, what’s interesting about this is that retail sentiment data also suggests that retail traders are piling in with short positions at this point.
What the retail market tends to do in trading is they add in heavily long on key highs and heavily short on key lows. The reason they do this is because they see that the price is falling, so they want to keep trying to sell-out that market. That is when they usually add in their biggest position, when we get the turns in the market.
We can see here that we’ve got this reversal pattern on the weekly as well. We have a nice indecision Doji here. If the price can break through this Doji high, that would be a good sentiment that we would see some upside.
If I go down into the daily timeframe, we’re seeing the price finding some support, where we had quite a nice wick into this level. Buyers came back in, the price is retesting that same area, and consolidating now.
In these consolidation areas, this is where institutions are building positions. What I would like to see from EUR/GBP is a breakout – which we’re leaning towards at the moment. I wouldn’t mind seeing the price come back into the consolidation zone, react from that level, and move back to the upside.
Again, we can look at how the price will react by looking at different types of breaks on the trend. One way to do that is through a nice little trendline; a potential break out to form here.
If we get a nice close above this trend line, it could be an opportunity to look for a long position. Or, if I grab a Fib tool and go from the current swing lows – which are here – and I go to the highs – which I’m going to use this previous structure high for.
Suppose, the price were to close above the 23.6 level. This coincides with the opens and closes up here. This would be a good sign that we would get that continuation of the change of trend.
So, keep an eye on EUR/GBP. It could be the one to watch this week and next week; there’s a major key area holding the support. The retail is heavily short, which usually means that the price is going to reverse, so keep an eye on this one.
Thanks for watching, and I’ll speak to you soon.
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