FxWirePro: EUR/GBP bulls back in action above 21-DMAs in minor, major uptrend stuck in range – Trade boundary strikes and directional hedge

Technical chart and candlestick patterns: EURGBP bears have shown their bearish effects in a broader perspective especially after RSI’s bearish divergence as stated in our previous post. 

While on daily terms, bulls take-off current prices above 21-DMA levels after testing downward trendline support, more rallies likely as both leading & lagging indicators signal intensified bullish momentum and the uptrend continuation.

At 0.8648 levels, a resembling bullish engulfing candle evidences the upswings above 21-DMAs that is now attempting to break-out stiff resistance of 0.8675 level.

As both leading (RSI & stochastic curves) and lagging (MACD) indicators signal intensified bullish momentum & uptrend continuation respectively, bulls have the little upper hand.

The cross has tested higher and failed at 0.8666 levels in the recent past. 

On a broader perspective, The major uptrend now goes in the range, while bulls attempt to spike further above EMAs but shooting stars & engulfing patterns, on this timeframe also, counter (refer monthly chart). For now, more slumps seem likely on RSI's divergence, above-stated bearish patterns and overbought momentum signaled by both RSI and stochastic on monthly plotting.

Overall, amid the prevailing consolidation phase, 0.8715 (in near terms) and 0.8840/50 (in medium terms) are quite crucial which is holding as key pivotal resistance. 

Trade tips: On trading perspective, at spot reference: 0.8643 levels, contemplating above-explained technical rationale, it is advisable to trade barrier option strategy using boundary strikes, upper strikes at 0.8675 and lower strikes at 0.8616 levels, the strategy is likely to fetch leveraged yields as long as underlying spot FX remains between these strikes on expiry duration.

Alternatively, on hedging grounds ahead of BoE monetary policy, we advocate initiating longs in EURGBP futures contracts of Mar’19 delivery as further upside risks are foreseen and simultaneously, shorts in futures of Apr’19 delivery for the major downtrend. Thereby, one can directionally position in their FX exposures. The directional implementation of the same trading theme by further allow for a correlation-induced discount in the options trading also if you choose strikes appropriately.

Currency Strength Index: FxWirePro's hourly EUR spot index has flashed at 21 (which is mildly bullish), while hourly GBP spot index has shown -99 (bearish) while articulating at 05:54 GMT.

For more details on the index, please refer below weblink:  http://www.fxwirepro.com/currencyindex