Jump to content

Bullish trend reversals in EUR/GBP and EUR/USD post European central bank decisions

Recommended Posts

Bullish trend reversals in EUR/GBP and EUR/USD post European central bank decisions

Both EUR/GBP and EUR/USD daily charts have bottomed out in the wake of the BoE and ECB rate decisions.

BG_ECB_european_central_bank_8741522.jpgSource: Bloomberg
 Axel Rudolph | Market Analyst, London | Publication date: Friday 04 February 2022 

Yesterday’s widely anticipated Bank of England (BoE) rate hike by 25bps, doubling the base rate to 0.5%, led to the EUR/GBP slipping to its major long-term support at £0.8305 to £0.8277.

It is comprised of several yearly lows seen since December 2016 and thus technically very relevant. The cross dropped to £0.8286 in the wake of the BoE pushing borrowing costs to the highest level in two years with four policymakers voting for an even bigger 50bps rate hike.

The Monetary Policy Committee (MPC) also announced that it would reduce the stock of UK government bond purchases, financed by the issuance of central bank reserves, by ceasing to reinvest maturing assets.

04022022_EURGBP-Monthly.pngSource: ProRealTime


Hawkish comments by European Central Bank (ECB) president, Christine Lagarde, in which she declined to rule out an interest rate rise this year, then provoked a strong trend reversal in the EUR/GBP currency pair with it forming a very long bullish candlestick which took out the last seven trading days.

04022022_EURGBP-Daily.pngSource: ProRealTime


The rally through the three-month downtrend line and above the January peak at £0.8422 bodes well for the bulls with the 200-day simple moving average (SMA) at £0.8516 being targeted.

Back in November the moving average provoked failure and it will be interesting to see whether this could happen again. If not, and if the current bullish trend reversal has legs, the November to December peaks at £0.8595 to £0.8599 may perhaps also be reached in the weeks to come.

Minor support sits between the November trough and breached downtrend line at £0.8381 to £0.8374. While this support zone underpins, further upside pressure is anticipated.

Another currency pair which has been heavily impacted by the ECB’s hawkish stance is EUR/USD which rallied by more than 150 pips following yesterday’s press conference.

04022022_EURUSD-Daily.pngSource: ProRealTime


EUR/USD has since been catapulted to the January peak at $1.1482, a rise and weekly (Friday) chart close above which would not only confirm a medium-term bullish trend reversal pattern but would also push the $1.1513 to $1.1529 October and 5 November lows to the fore.

Once overcome, the August low, October high and 200-day SMA at $1.1664 to $1.1692 would be in focus. Potential slips should find support along the breached 2021 to 2022 downtrend line at $1.1412. Further support can be spotted between the late November and December highs at $1.1386 to $1.1382.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 10:53

    Newest Member
    Joined 28/01/23 09:29
  • Posts

    • Capital, win loss ratio. If you have a trading edge and you can consistently win 50% of your trades, so your winning 5 trades out of 10. So if your risking 1% of your capital per trade, out of your 10 trades 5 would be losers, so that’s 5% loss and realistically out of the 5 winning trades, some would make small profits, some break even and 1, 2 or 3 could run nicely IF you can let your profits run, basically your making money out of 2 trades out of the 10 trades (80/20 Rule Pareto principle) So a $20,000 acct risking 1% is $200 per trade, this will keep the trader with his trade risk based on being able to win 50% of his trades. A long term trend trader can win with 30% wining trade. Basically you need to know your numbers. Rgds Pete
    • Investing in stocks can be a great way to grow your wealth over time. However, there are different approaches that investors can take when choosing which stocks to buy. Two of the most popular approaches are growth investing and value investing. Growth Investing Growth investing is an investment strategy that focuses on buying stocks of companies that are expected to grow at a faster rate than the overall market. These companies are often in industries that are growing quickly, such as technology or healthcare. Investors who use this approach believe that these companies will be able to generate higher profits in the future, which will lead to higher stock prices. One of the main advantages of growth investing is that it can potentially provide higher returns than the overall market. However, it is also riskier than other investment strategies, as these companies often have higher valuations and more volatile stock prices. Value Investing Value investing is an investment strategy that focuses on buying stocks of companies that are undervalued by the market. These companies may be in industries that are out of favour or have recently experienced challenges, but they have strong fundamentals and a history of profitability. Investors who use this approach believe that these companies are undervalued and that their true value will be recognized in the future, leading to higher stock prices. One of the main advantages of value investing is that it can potentially provide lower risk than growth investing. However, it may also provide lower returns in the long run, as these companies may not have the same growth potential as companies in the growth investing category. Comparing Growth and Value Investing Growth and value investing are two different approaches to stock investing, each with its own advantages and disadvantages. Growth investing can potentially provide higher returns but is riskier, while value investing can provide lower risk but potentially lower returns. An investor may choose one approach or a combination of both. A portfolio that contains a mix of growth and value stocks can provide a balance of potential returns and risk. Conclusion Both growth investing and value investing can be effective ways to invest in stocks. The key is to understand the potential risks and rewards of each approach and to choose the one that aligns with your investment goals and risk tolerance. Analyst Peter Mathers TradingLounge™ 
    • I am a beginner, and I must say, there are a lot of rules to the trading game that one must abide by if they want to be successful.   Here, the writer mentions several basic rules for day vs swing trading.  However, I find that often times, the reasoning for these rules is not as  obvious for a beginner as it may be for an expert.   The 'why' factor if I may. For example, why must you have a large capital to trade with as a day trader? Because your positions must be large so that a small change in price will be augmented and turned into a large profit. Also, with such high risk, the margin will be specially high, given the trader is taking up large positions at a time.  Without a large amount of capital, positions may be forced to close due to funds being below margin requirements.  When this happens, you can expect to lose tons of cash, fast.  I learned the hard way. All the best, David Franco      
  • Create New...