FxWirePro: EUR/GBP long setup for buzzing bulls on hammer formation, strangle writing as intermediate trend stuck in range

EURGBP endures to grind upside after breaking pivotal resistance in the 0.8840/99 region as bulls bounce back with bullish DMA & MACD crossovers. This hints us within the current medium-term range between 0.8700-0.8630 support and 0.9100 resistance. Rising intra-day support today lies in the 0.8870-0.8840 region. 

Well, the current price spikes above DMAs, for now, more rallies seem to be on cards as both leading oscillators (RSI & stochastic curves) substantiate intensified buying momentum.

While over, the grind higher is intact with stepping-stone resistance lying at 0.8910/15, 0.8955 and 0.9020 ahead of the range highs.

Intermediate trend attempts to spike above EMAs & go non-directional, as both leading oscillators & lagging indicators have been indecisive but slightly bearish bias.

On a broader perspective, we cannot afford to disregard a retest of the 2008 highs at 0.9802. 

Nevertheless, the risk of that decreases the longer we remain within this medium-term range under 0.9300-0.9710. A decline through 0.8250 key support would negate upside risks and implies a move back to 0.8000 and then 0.7500.

Fundamentally, the Italy-induced risk premium will only be priced out of the EUR exchange rates once a sustainable solution in the budget debate emerges. Until then the euro’s appreciation potential remains limited. Gilts were supported by the Budget announcements yesterday, but the pound found little solace as markets remained focused on Brexit risks.

Trade tips:

For intraday trading perspective, capitalizing on the prevailing buying sentiments, it is good to go long on every dip. Thus, we advocate one touch binary call strikes at 0.8917 levels.

On the flip side, as you could observe the swings of this pair, as explained in the intermediate trend, have been oscillating between 0.8297 and 0.9280 levels since July 2016, it is wise to deploy (0.5%) out-of-the-money call and (0.5%) out-of-the-money put options of 1m tenor as IVs of this pair is on lower side. The strategy can be executed at the net credit and certain yields would be derived in the form of initial premium received as long as the underlying spot FX remains between OTM strikes on the expiration.

Currency Strength Index: FxWirePro's hourly EUR spot index is flashing at -62 levels (which is bearish), while hourly GBP spot index was at -129 (bearish) while articulating at (12:54 GMT). For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex