Trade Idea: EUR/GBP – Sell at 0.8890 or buy at 0.8670

EUR/GBP – 0.8781

Original strategy  :

Sell at 0.8890, Target: 0.8740, Stop: 0.8930

O.C.O.

Buy at 0.8670, Target: 0.8820, Stop: 0.8610

Position : –

Target :  –

Stop : –

New strategy  :

Sell at 0.8890, Target: 0.8740, Stop: 0.8930

O.C.O.

Buy at 0.8670, Target: 0.8820, Stop: 0.8610

Position : –

Target :  –

Stop : –

 
Although the single currency continued trading defensively after breaking below support at 0.8774 and near term bearishness remains for the selloff from 0.9307 top to extend weakness to 0.8690-95 (61.8% Fibonacci retracement of 0.8312-0.9307), loss of downward momentum should prevent sharp fall below 0.8670-75 (50% projection of 0.9226-0.8774 measuring form 0.8899) and bring rebound later. Above 0.8815-20 would bring recovery to 0.8850, however, resistance at 0.8899 should cap upside and bring another decline later. 

In view of this, whilst we are looking to sell euro on recovery, we are inclined to turn long on subsequent decline as 0.8670-75 should limit downside. Below 0.8640-50 would risk weakness to 0.8600-10 but sharp fall below there should not be repeated and risk remains for another rebound to take place soon. 

Our preferred count is that, after forming a major top at 0.9805 (wave V), (A)-(B)-(C) correction is unfolding with (A) leg ended at 0.8400 (A: 0.8637, B: 0.9491 and 5-waver C ended at 0.8400. Wave (B) has ended at 0.9413 and impulsive wave (C) has either ended at 0.8067 or may extend one more fall to 0.8000 before prospect of another rally. Current breach of indicated resistance at 0.9043 confirms our view that the (C) leg has ended and bring stronger rebound towards 0.9150/54, then towards 0.9240/50.