Short EURGBP! It is about to break .7860

We have been holding a short EURGBP for a few weeks and thought that we could have been “early to the party.”  The last week and half is making the position look better because price has not been able to rise above .795 on its way to making a new high.  There have been data points that could have sent the pair higher but the bears seem to be gaining traction.  Examine the following:

The politicians have been laying the “Brexit Fears” on heavy.  Both Bailey and Carney from the BOE have tried stoking the fears but price has stayed in a tight two and half week range.

EU data has been less then steller with a GDP miss and contracting producing in its largest manufacturing region (see below).

EU —Real GDP +0.5% (Q1 P)
EU —Industrial Production -0.8% (Mar.)
Germany—Industrial Production -1.3% (Mar.)
France—Industrial Production -0.3% (Mar.)
Italy—Industrial Production unch (Mar.)

The technicals are also not looking good for EURGBP.  Price has been touching .786 and making lower highs for over five days.

daily EURGBP chart
Price has been touching .7860 but can’t break through and price has not been able to break higher.

What is more striking is on the weekly chart we find a bearish engulfment and price has retraced to a decent spot to short roughly 33%.

EURGBPweeklyChart16May2016
There is a large engulfment back in April, price continued to drop but has increased to a nice place to short.

 

After breaking .7860 price should slide .7730 We have $40k and feel better about the position.  Our stop is at .7960 with a target at .72.  We like a large reward to risk.

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