EUR/GBP: Much more likely to fall in medium/long term
Not that I’m recommending that anyone take a position in this ‘tortoise’ of a pair, but if you do see any technical set-ups which favour the bearish side then I think its worth consideration.
One professional trader gave me a scenario recently which could easily come to pass. The ECB will take over the stress testing of regional European banks early in 2014. He expects many banks to not only fail these tests but also fail completely.
This will lead to a massive move of real money out of Europe and into the GBP and CHF in particular. He sees EUR/GBP below .7500 by early next year and more controversially, he sees EUR/CHF back at 1.10.
then again I reckon the Europeans will keep papering over the cracks!
Hi Sean! So he’s expecting the SNB to abondon the floor? Why? Very curious to learn about his thinking.
Not abandon, be forced to lower due to weight of selling! 100% of all attempts that I’ve ever seen by CBs to form a floor or roof have eventually failed.
Hi Sean, even there’s a tsunami of money coming into CHF, SNB could always print unlimited amount of their money with a mouse click, right? Sorry if that’s naive; I’m not an economist…
Hi Sean, where do you see the “fair value” of EURGBP longer term, if there’s such a thing in fx? Closer to 0.75? (EURUSD=1.2 and GBPUSD=1.6)
Yes Jasper, I’d say .75 is close to fair.
Yes of course SNB could change the game by printing just like Fed and the rest. Let’s hope they stay sensible
Good evening Sean,
Thanks for the reply (GBP/USD trade idea), I will jump in.
In relation to this post, let’s go for a trade proposition on EUR/GBP. We have trendline (see chart) from 0.8400 (4H), if we break it at .8470, we could play the re-test of this point. If it holds then sell with tight stop above .8510.
http://img69.imageshack.us/img69/4308/m461.jpg
What do you think with that ?
Sounds like a good plan Papillon, nice cheap trade as well; good luck. Been long week, I’m tired, going to have early night I think
Plus have a look at AUD/JPY chart https://www.tradingview.com/x/ATBTW4Xi/ if 90.00 support holds then load up with tight stop for slingshot move higher 🙂
Thanks Sean. You give me good trading prospects for today. Moreover it’s Friday 😉