The euros to pounds pair continue to move in a falling wedge, suggesting that we will see a break lower in due course. The last few weeks simply confirm this view, but before we enter any long term trades I would suggest waiting for prices to break below the lower edge of the wedge, which at the moment is looking towards the 0.86 region as a possible entry point. In the meantime we have to take a wait and see approach with this pair for the time being. The moving average are providing little in the way of any confirmation, and unless you are trading an options strategy, or a fixed odds no touch trade, then I would advise you to stay out, until we see some clear trading signals in the market. The European fundamental news has already been released with little impact on the currency, and with no news in the UK for today, expect to see more sideways action ahead of the weekend. I will be back on Monday with more news and update and let’s hope we see some significant price moves next week for the euro pound pair.
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Archive for February 2009
Another very difficult pair to trade, in this case with a falling wedge, which suggest that the bear trend remains in place for the medium to long term. My view is that the euro is over bought and we should see a fall in the next few months. This one is therefore a long term trade only, and I wold suggest you use the daily charts to find an entry point to a long term sell. My suggestion is therefore to wait for a reversing signal in the daily candles and then to open your short position with a stop loss set well above the open. My own target for the pair is back to the resistance level at 0.7800, but this may take a few weeks or even into the summer so you will have to be patient with this trade. The 40 day moving average is suggesting a move lower and I will be more confident once we see the current price break below the 0.8650 region. If and when this happens then we should see the break lower.
On the fundamental news front the Revised GDP figures were released this morning with little impact on UK sterling coming in at -1.5% against a forecast of -1.6%. The only other news likely to affect the pound is MPC Member David Blanchflower is due to speak at the University of Stirling, in Scotland. If the statement is more hawkish than expected then this is likely to be good for the home currency, in this case the pound. MPC members vote on where to set the nation’s key interest rates and their public engagements are often used to drop subtle clues regarding future monetary policy.
The short term and medium term is sideways, the long term outlook is bearish.
The euro pound is becoming increasingly difficult to trade at the moment, and whilst the general trend is bearish, as expected, the move downwards is very sluggish, with the possibility that the pair are now beginning to consolidate in the 0.8700 region, with a possible triangle pattern. Whilst yesterday closed down on a wide spread down bar following the indecision of a doji the day before, today prices have edged higher again, so the direction is very unclear at present. The moving averages are all pointing lower and should we see a break below 0.8650, then this could be the signal for a move lower to the 0.8400 region. We now have resistance forming above in the 0.9000 region, which will provide protection for us in any short positions in the future. My view on the pair remains unchanged as I believe the euro is over bought against the UK pound and we should see prices fall in due course, but as always we have to wait for the signal to appear in the chart. I have covered the fundamental news for the UK pound on the pounds to dollars site, and for the euro on the euro to dollar site.I would suggest that you take a wait and see approach with this pair for the time being – sorry!
The short and medium term outlook is sideways, the long term is bearish.
My suggestion for today, is much the same as yesterday, in other word small short positions with a stop loss above the 0.9500 region. The bearish sentiment now seems to be back in place with a failed attempt to rally yesterday in the pair, leaving us with a down day doji. More importantly, prices closed below both the 9 day and 14 day moving averages and we should now see a move back to retest the 0.8750 region. As you know my long term view is bearish but I try not to let this colour my judgement on an intra day basis! We are still trading in a relatively congested region so I would advise small positions and tight stops for your trading for today.
On the fundamental news front I have covered both the euro and UK pound on two of my other sites – if you would like to view these please just follow the links to the euro to dollar for the euro, and for the UK pound, the pounds to dollars site.
The short term outlook is bearish, the medium to long term is also bearish.
Yesterday gave us a wide spread down bar in the daily chart, which suggests that the bearish tone is now back in place, with the candle crossing below all three moving averages and failing to penetrate back into the 0.9000 region. With the failed test above and the moving averages having been crossed this is suggesting that we can expect a move lower in the next few days. The candle of yesterday has cleared the previous support region at 0.89, and I am expecting prices to fall to 0.8400 in the next few weeks. As I have mentioned several times before the euro is heavily overbought against the pound, and by the summer I would expect to see the price for the euros to pounds pair somewhere in the 0.78 to 0.76 region. The fundamental news this morning had little impact on UK sterling and I have detailed this on the pounds to dollars site. My suggested trade for today is small short positions, with a stop loss above the open of yesterday.
The short term and medium term outlook is bearish, and the long term is sideways.
I did suggest yesterday that we consider a long trade today, provided the signal was positive, but the morning has opened with a wide spread down bar which now seems to be pointing to a continuation of the move lower, which is the long term trend for the pair. If the candle closes the day below all three moving averages as seems likely, then we can expect a move lower, perhaps back to re-test the support level at 0.8700. If you are trading this afternoon I would suggest small short positions, but with a tight stop above the open for today. The main fundamental news out this morning was in Germany with the ZEW figures which came in at -5.8 against a forecast of -26.5 suggesting that the economic sentiment of the respondents was more optimistic than before, perhaps suggesting that the economy is in better shape than originally thought! In this case we should have seen the euro pound pair rise, but in fact it promptly reversed on the news!! The market is clearly not confident in the euro based solely on this news, and with Ireland on the verge of bankruptcy, this is not helping. The UK data has also been releaed with the CPI number this morning, and more details can be found on the pounds to dollars site.
The short term, medium term and long term outlook is bearish.
The daily candle on Friday provided little in the way of a signal or confirmation of previous moves during the week for the euros to pounds pair. The most interesting aspect of the candle is the length of the lower wick, which shows a deep retest back into old ground. In other words the bears tried to take control, but the bulls won the day, with prices falling and then recovering with a down body on the day. Whilst prices did cross both the 9 day and 14 day moving averages, they recovered to close above, suggesting that we may see a short term move higher during the week, which is as suggested on the euros to pounds weekly chart . Adding some weight to this is analysis is the support line at 0.8830, which has been touched no less than five times in the last five weeks with prices bouncing higher in the short term. As the markets are closed in the US and Canada today, I would therefore suggest waiting for tomorrow before considering open a long position, but one which may only be in place for a few days, and with a stop loss below the 0.8650 region. There is very little fundamental news out today and I have commented on the various data released on the euro to dollar, and pounds to dollars weekly posts
The short term outlook is bullish, the medium to long term is bearish.
Euros To Pounds - Weekly Candle Chart 16th February 2009
Mmm – well last week’s candle did at least provide a signal, but I’m not sure how much weight we should give this as a long term indicator for the euros to pounds pair, for two reasons. First, in the last four weeks we have one bearish engulfing signal of three weeks ago, followed two weeks later by our bullish engulfing candle of last week. So in the space of four weeks we have had two completely opposing signals. Of the two, the bearish signal was the stronger with a wide spread down bar engulfing a wide spread up bar. Last weeks signal was weaker as the body was only 100 pips, and with a wick top and bottom was hardly a strong signal, with Friday’s close only just crossing the 14 day moving average. However, both last week and the week before touched the same lows, indicating some resistance at 0.8650. My suggestion therefore, although I have to advise caution here, is to look for long positions this week, but probably closing out before Friday as I still believe that in the longer term the euro is overbought and therefore the pair are set to fall. This would be in line with the stronger bearish engulfing signal of three weeks ago.
As I am sure you know, today is a holiday in the US with all the markets trading on very thin volumes, so I suggest you wait until tomorrow before looking for an opening in the daily chart. I have outlined all the fundamental news for this week on the euro dollar weekly update for the euro, and on the weekly pounds to dollars chart for the UK pound.
UK Chancellor Alastair Darling is in for a rough ride this weekend as the French and German finance ministers are expected to confront him over the weakness of the UK pound at tonight’s opening dinner in Rome. Many experts and commentators believe that they will exert some pressure to increase the value of the pound by direct action, following its worst devaluation since the breakdown of the Bretton Woods agreement in the mid 70′s. As we have seen in the last few days, the pound moved lower against the euro along with a basket of other currencies, largely on the back of the word ” deep” used to describe the current recession in the UK by Mervyn King. In addition the Bank of England has now acknowledged that it is planning to start buying gilts immediately as part of its effort to restore the currency. Needless to say, many companies in Europe are now complaining that their exports are being hit hard, with many businesses switching to cheaper UK goods and services. In addition to describing the economy as being in a deep recession, the BOE also signalled that interest rates were likely to fall even further in the coming months, possibly to zero, replicating a vision of the Japanese recession of the early 1990′s which lasted 10 years. In addition, the Bank also suggested that it would soon start to pump cash directly into the economy, along with buying government securities.
None of this has endeared Mr Darling ( or Mr Brown who thinks he is in charge), to his European colleagues who are furious at the problems that this policy is creating in Europe, and they have all indicated that the issue of currency exchange will be high on the agenda at the meeting. Hence as I have been saying all week, I would suggest that any open positions are closed as we wait for any reaction to the meeting to hit the market on Sunday evening.
Yesterday’s move back up into the resistance at 0.91 was much as I expected, and as you can see from the last three days, the body of each candle is narrowing on each. This combined with the increasing upper wick on each would suggest that we are expecting this short term rally to come to an end and possibly roll over today. The closing price was just above the 14 day moving average, but with all the averages now starting to cross over again, the short term trading picture is not clear cut. My view longer term is bearish as I believe the euro is over bought against the UK pound. Shorter term is more difficult. For today I would suggest staying out until we have a clear signal which may be on Monday if we have a down bar today. I will ofcourse be updating the weekly chart over the weekend so this may give us some signals for the longer term.
On the fundamental news front there is virtually no data due for release today with all the focus on the G7 meeting in Rome.
The short term outlook is sideways, the medium and long term is bearish.
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