Last week, the EURGBP started its predictable bearish descent. Today, traders everywhere are wondering what to expect for the back end of Q4. The weight of evidence indicates that bulls probably have a slight advantage over bears for the pair in the coming days and weeks, so FX News put together a technical analysis for traders to apply on their MT4 trading platform in order to keep a close eye out and be ready to pounce.
The trendline break itself is a bullish sign, which generates an upside target equivalent to the length of the move immediately prior to the trend-line break (labelled ‘x’). It’s not a strong enough indicator to promote a buy order just yet. One potential technical spoiler to an upside continuation is the location of the 50-day moving average (MA) close to price action at 0.8875.
Major MAs tend to provide dynamic support and resistance, but there is a risk that the exchange rate could be pushed back down by the MA itself. This is a cause and effect paradox, as almost every professional trader applies MAs to their forecasting strategy. The exchange rate has already closed above the MA once, which often suggests a bullish interpretation. The last few day’s support that conclusion.
One possible source of strength could come from an easing in the stand-off between Brussels and Rome. Whilst it seems unlikely that the Italian government will adjust their budget to be thriftier, the continued fall in Italian government bonds and the financial stability risk that is threatening the Italian banking system cannot be ignored much longer without a full-blown crisis developing.
If the situation overboils, the Italian government may have to stand down and accept the EU’s compromises, and this would calm markets and restore the Euro, reversing the recent rise of Sterling.
A mixed message to say the least, but what else can be expected from Brexitland? For now, traders have their MT4 open every day, ready to react and maximize profits from ‘trading the range’. There’s no doubt that a select few fast-acting traders will make enormous gains from Brexit, and the coming days and weeks will reveal whether those profits will be from ‘sell’ or ‘buy’.
If you’d like to be ready for the Brexit blowout, sign up for a free account with Exness today, try these observations on the coming markets, and be ready to act.