EUR/GBP’s Technical Setup Ahead of the BoE Meeting Minutes |
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EUR/GBP
Weak Breakout So Far:
- There was indeed a correction rally to follow a completed declining wedge.
- This initial breakout was weak in that it failed to establish bullish momentum (RSI failed to break above 70). Despite the weak bullish attempt, the structure was a 5-wave rally before consolidating this first half of the week.
Short-term Head and Shoulder Forming:
- Current, the consolidation is range-bound, with a possible head and shoulder in development. One would be formed if the market continues lower in the Asian session to break below 0.8755.
- A swing projection targets 0.8740. Here the market would have completed a 3-wave decline after a 5-wave rally. It would represent a harmonic, or Gartley retracement pattern (a deep one at that).
BoE as Fundamental Risk Event:
- The Bank of England Meeting Minutes are due 4:30 AM EDT (8:30 GMT, 9:30 BST).
- Last time, we had dovish minutes and a slide in the sterling, or rather a strong push to the upside by the EUR/GBP.
- If the market latches on any signs of QE, the EUR/GBP could see a continuing bullish correction.
If Head and Shoulder already formed:
Bearish scenario:
- If there is a head and shoulder created ahead of the minutes and 1) We push below 0.87, we are bearish with 0.8666, then 0.8615 in sight. 2) Supported but already below 0.8740, look for the support the minutes gave to break before considering bearish continuation.
Bullish Scenario:
- If however, the market is supported above the 0.8705 low, and pushes back into the head and shoulder above 0.88, we can be in a bullish continuation, with wave equality at 0.8840. The broken wedge would be completed retraced at 0.8850.
No Head and Shoulder ahead of Minutes:
- If the market does not form a head and shoulder, it is range-bound. Therefore, a break out of the range is the signal for the trend direction in the short-term.
- In a strong minutes-induced breakout, the bearish target is 0.8805, and the bullish target is the full wedge retracement in the 0.8840-0.8850 area.
Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.
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