Last night we closed all of our positions in the Forex portfolio and booked a profit over 50%. This morning while we were reevaluating the market we felt that EURGBP offered a decent reward to risk of 5 to 1 when looking at the daily and weekly charts.
Technical levels are not the only reasons to enter a trade. You also need fundamental data that will push price in the direction of your target. The British Pound has been weakening since late 2015 but has recently started to gain traction versus the USD and EUR. We feel that the EURGBP offers the best trade opportunity due to the upcoming EU referendum vote.
The cause for the rise of EURGBP are based on Brexit fears and under performing data announcements from the UK. The increase experienced during the last six months has overshot the real value of the British pound.
We feel EURGBP will continue to drop as more polls show the UK will stay in the EU. There is also a strong possibility that the UK economic data will continue to beat expectations.
The EU has run into headwinds as its economy continues to slow and political risks continue to be present with the Spanish elections in June and a resolution is expected from the German Constitutional Court on the OMT.
There is resistance on the EURGBP daily chart around .7740 from a high volume area formed during late April. This gives a great opportunity to go short with a resistance barrier to put your stop above at .782.
EURGBP Has A Long Way To Fall
Assuming EURGBP can break lower through the high volume area between .7685 and .755 it should have a decent run to .74. We advise taking profits on the way down as we did last night and reassessing the opportunities going forward. We do think that there is a strong possibility that the EU will continue to have a slowing economy and the news out of the UK will only strengthen the Pound.