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    Today’s Trading Edge: EUR/GBP – Robust UK retail sales strengthen sterling

     

    WWM EURGBP MAY 21 2015

    EUR/GBP fell to a fresh two-month low after a report showed that U.K. retail sales jumped 1.2% in April, much higher than the expected 0.4% increase.  The impressive print took the strong trend of increasing sales to a record 26 straight quarters.   

    The reaction to the strong reading took the currency pair from .7153 to .7109.  Currently price is residing near critical support from the M-shaped pattern identified in my last EUR/GBP post.

    The bearish move now appears strengthening as price appears poised to have a fourth consecutive bearish trading day.  With price now comfortably trending below all three key (200-, 100-, and 50-day) SMAs, we could see a considerable drop target the psychological .70 handle.  Beyond that level, support may initially target the .6887 level and eventually the .6561 zone.   

    If we see a round of profit taking, upside may be capped by the .7180 area.   In the event, bullishness recaptures the .7200 handle, critical resistance may come from the 50-day SMA, which is trading at the .7242 level. 

    The trade: Sell EUR/GBP at .7125, with a stop loss at .7185 and a take profit at .7005.  The Risk/Reward Ratio is 1: 2

    Edward J. Moya

    Senior Market Strategist

    WorldWideMarkets Online Trading

    Forex Trading Demo
     

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