FxWirePro: EUR/GBP bullish DMA crossover and engulfing pattern warrant major still remains intact amid minor hiccups – Boundary binaries to trade and long hedges

On daily terms, despite the ongoing selling sentiments observed from the last two days, the following features should not be disregarded:

The bull swings are intensified last week ever since the strong support is tested at 0.8743 levels (0.8746 to the recent highs of 0.8992 levels (about 2.84%).

7DMA crosses over 21DMA which is a bullish crossover, while the current price is still well above DMAs with strong support at 0.8908 (7DMA), the sustenance above & bullish DMA crossover may drag rallies.

Short-term studies suggest a pullback is warranted in the cross, with 0.8915-0.8880 seen as support. While these levels hold, the gains from 0.8746 lows set at the end of September should extend towards more important resistance in the 0.9050-0.9100 region.

A drop through 0.8880 would suggest a range is developing between 0.8690 and 0.9000.

On medium term perspective, we are back to mid-range (0.8250-0.9415) and in such regions price action usually becomes very choppy. The occurrence of gravestone doji at 0.9262 levels has evidenced considerable slumps upto the recent lows of 0.8746 levels, whereas the bullish engulfing pattern candle has occurred at 0.8977 marks (weekly chart) to counter these bearish streaks.

Well, on a broader perspective, we still risk a re-test and break of the 2008 highs at 0.9802, although the decline from 0.9300 through 0.8800 decreases the risks somewhat and leaves us in a medium-term range. A break of major barriers at 0.8775 and 0.8326 reverses the risk completely.

Contemplating above technical rationale, boundary binaries are advocated on an intraday speculative basis, we see the price to remain well within the range between 0.8976 (yesterday’s open) and 0.8908 (i.e. 7DMA). Hence, we advocate buying boundary binaries with two strikes.

The trading between this 70-75 pips likely to derive certain yields in this puzzling trend and more importantly these yields are exponential from spot movements.

For cash or nothing, these options would be exercised if the forward prices to remain between both strikes (i.e. 0.8976 > Fwd price > 0.8908).

Currency Strength Index: FxWirePro's hourly EUR spot index has shown 130 (which is bullish), while hourly GBP spot index was at 19 (neutral) at 10:02 GMT. For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex.

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