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Today’s Trading Edge: EUR/GBP – sterling strengthens after inflation report

 

WWM EURGBP AUG 18 2015

The British pound strengthened against its major trading partners after a report showed a slightly better than expected 0.1% y/y gain.  Both the prior reading and forecast were flat. Core CPI also jumped an annual rate of 1.2%, with June being revised to 0.9%.   This marked the fastest pace with core CPI since February but, might not be a strong enough rise with inflation to be able to persuade the Bank of England into thinking a rate hike could be sooner. 

The EUR/GBP daily chart shows the long-term downtrend strongly broke below the 50-day SMA and has found major support from the .70 handle.  If downside continues, the next major support level will come from the 2015 low of .6934.  A break below this level could see deeper support come from the .6814 level.  

If we see price recapture the 50-day SMA, further upside could target the .7250 level.  Major resistance will come from the 200-day SMA, which currently trades at .7384 level. 

The trade: Buy EUR/GBP at .6850, with a stop loss at .6750 and a take profit at .7050.  The Risk/Reward Ratio is 1: 2

Edward J. Moya

Senior Market Strategist

WorldWideMarkets Online Trading

Forex Trading Demo
 


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