Technical chart and patterns: EURGBP bears have shown their effects in a broader perspective after RSI’s divergence as stated in our previous post.
While on 2H chart, the has occurred at 0.8690 levels that evidences upswings at strong support of 0.8671 levels, bulls have now taken-off current prices above DMAs , but back-to-back patterns have occurred in previous trading sessions. These patterns have signaled weakness. More rallies are likely only upon the sustenance above DMAs ahead of Euro area PMIs.
As both leading & lagging indicators signal intensified momentum & uptrend continuation bulls have a little upper hand.
The cross has tested higher and failed at 0.8703 levels quite often, after the recent consolidation phase. However, 0.8715 (in near terms) and 0.8840/50 (in medium terms) are quite crucial which is holding as key pivotal resistance.
On a broader perspective, The major uptrend now goes in the range, while bulls attempt to spike further above EMAs but shooting stars & patterns, on this timeframe also, counter (refer monthly chart). For now, more slumps seem likely on RSI's divergence, above-stated patterns and overbought momentum signaled by both and on monthly plotting.
Trade tips: Contemplating above technical factors, we positioned for a modest albeit distinctly bounded relief rally in GBP amid prolonged Brexit dust in the UK parliament through a ratio put spread. Maintain a 2m 1x1 .5 EUR put/GBP call spread, 0.88- 0.8650 with an 0.85 RKI on the lower strike. Expiry March 15, 2019. Paid 39bp in November. Marked at 2bp.
Currency Strength Index: FxWirePro's hourly EUR spot index has flashed at -13 (which is mildly ), while hourly GBP spot index has shown 93 ( ) while articulating at 06:24 GMT .