FxWirePro: EUR/GBP Technical Chartpack and Derivatives Trade Setup

Although EURGBP’s intermediate trend hits 4 and a half month highs, but we could see renewed weakness for today after breaking down below 0.8971 (i.e. 7-DMA levels, refer daily chart). Consequently, the minor trend is currently heading for further slumps as both momentum indicators are in tandem with the prevailing price dips. Both RSI and stochastic curves show bearish divergence.

The prices continue their grind higher short-term trend basis, with some hefty resistance levels of 0.9097 not far away now. 

While channel resistance lies around 0.9035 (refer 4H chart), while medium-term range resistance is above at around 0.9098 areas.

Daily technical signals continue to suggest a significant pullback is warranted, but price action is not confirming this at the moment. Intra-day support lies at 0.8990-80, while daily support sits below around 0.8900. A clear break and close above 0.9115 take us into a new bull dynamic.

Longer term, prices are in a contracting range between 0.8250 key medium-term support and 0.9300-0.9415. The underlying studies are biased for an eventual break down through the support region, but a move through 0.9100 would do damage to that view, with a break of 0.9415 and 0.9710 suggesting a re-test of the 2008 0.9802 highs.

Trade tips: On trading perspective, at spot reference: 0.8969 levels, contemplating above-explained technical rationale, it is advisable to trade one touch put option strategy using strikes at 0.8890 levels, the strategy is likely to fetch leveraged yields as long as underlying spot FX keeps dipping towards this strikes on expiry duration.

Alternatively, ahead of ECB monetary policy, on hedging grounds, we advocated initiating directional hedges that comprised of shorts in EURGBP futures contracts of July’19 delivery and simultaneously, longs in futures of Aug’19 delivery for the major uptrend. 

The strategy has acted as per whims and fancies of our predictions, we now wish to uphold long leg by rolling over to Aug’19 delivery with a view of arresting further upside risks.