FxWirePro: EUR/GBP market profile and short-term indicators signal weakness despite 18-weeks highs – Bid double touch puts ahead of BoE

Although EURGBP’s intermediate trend hits 4 and a half month highs, we could see renewed weakness for today after breaking down below 0.8918 (i.e. 21-SMA levels), consequently, the minor trend is currently heading for further slumps as both momentum and trend indicators are in tandem with the prevailing price dips.

Market profile on 4H: 

Point of control (PoC) is at 0.8910, 

Unfair highs – 0.8926

Unfair lows – 0.8899

Value area (VA) – 0.8919 – 0.89

21-SMA – 0.8918

7-SMA – 0.8916

RSI – shows downward convergence to the price dips to signal weakness in the minor trend (refer daily chart) and upward convergence to the rallies (on weekly terms) to indicate the strength in the prevailing upswings.

If the market is balanced, it has already found the point of control which is the fair price, and that’s where it will equal number of buyers and sellers. It is most likely to generate range bound day as the prevailing price revolves around the PoC.

While the major uptrend has been prolonging in the range, but the latest uptrend hit 4 and a half months’ high upon the formations of the bullish engulfing pattern at 0.8635 levels (refer weekly plotting), both lagging indicators substantiate buying sentiments as bullish EMA and MACD crossovers are traced out on this timeframe.

Furthermore, a rally through 0.8975 would negate that bearish dynamic and suggest a return to the previous upper range, in which pivot resistance is at 0.8840/60 and key resistance remains at 0.9100-0.9170.

Trade tips: On trading perspective, at spot reference: 0.8904 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 BoE monetary policy, on hedging grounds we advocated initiating directional hedges that comprised of shorts in EURGBP futures contracts of Apr’19 delivery and simultaneously, longs in futures of June’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 July’19 delivery with a view of arresting further upside risks.

Currency Strength Index: FxWirePro's hourly EUR spot index is inching towards -141 levels (which is highly bearish), GBP is at -77 (bearish), while articulating (at 12:21 GMT).

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