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EUR/GBP/USD Triad

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My road map on EURGBP has worked out exceptionally well, and I made some good gains on this one, but I have been expecting a strong retrace and retest of the Weekly chart Triangle breakout zone for some time and looks like this pair have started this retrace journey.  The EWT count to a wave 1 (green) is sound and there was strong PMD and positive divergence on RSI also.  Now a possible A-B has been posted with a higher low so a further rally is indicated.  If GBPUSD falls, as I have suggested in a separate post then EURUSD must rally (or fall more weakly).

 

EURGBP-Daily_300319.thumb.png.c7fda960aca42b8a3291f9c1f7705bb9.png

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Comparing the primary USD crosses to this Triad cross is always important for me to check my analytic conclusions from the main USD pairs.  My conclusions are that EURUSD is set to rally while GBPUSD will fall a little further before rallying.  So I would expect to see evidence of EURGBP bullishness and this is what I do see, which has not changed since my last post.  A retest of the Weekly chart Triangle lower line is my lead scenario, with the breakout zone a possibility as well.  A short campaign off this potential turn could be very lucrative, although it depends on how other markets are shaping up around the same time of course.  The key points of this analysis for me are as follows:

  1. It supports my short/medium term view that EURUSD can rally despite GBPUSD falling, although I expect GBP to follow suit eventually.
  2. It supports my view that EURUSD will be a big looser and ripe for a major Short campaign  

EURGBP-Weekly_130419.thumb.png.72231e0d83b096fae66b02a1771bda84.pngEURGBP-Daily_130419.thumb.png.e2fa5c1bb158dfaa6ee55b524b7db88d.png

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FX seems to be all about USD strength, although I remain on the sidelines to see whether this materialises soon or requires a large retrace to "prime the pump".  One thing that is certain is that EUR has been stronger than GBP, which is exactly according to my road map for this pair (see previous post).  The retrace is in complex form, lots of whipsaw, but now has raced into the wave C and has shot straight up towards the 2 resistance zones I had previously identified.  At present I am still tipping a retrace of the long term Triangle consolidation lower line but first we will see how a retest of the breakout zone.  Long term I am tracking GBP strength vs the Euro with massive structural issues within the Eurozone (fiscal and political) as fundamentals backdrop.

 EURGBP-Daily_180519.thumb.png.c07a25daae8f50ef1d760684288e8683.png

 

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Looks like this pair may just have ended a retrace move.  It has been a sharp rally in favour of the Euro but at a minimum a short term bearish move is indicated, which could turn into that rout of the Euro I have been tracking.  This is a contrarian position of course because naturally everyone thinks Brexit is inherently bad for the UK and therefore bad for GBP.  I think neither and my technical analysis says so too, at least in terms of GBP, whatever about the other.

The technicals on EURGBP show the following for me:

  • Price has hit the Fib 62% and bounced back down
  • Strong NMD at this turn point
  • Decent 1-5 EWT count on the wave C
  • Current breakout of the Daily chart trend line to the bearish side (not yet closed below)
  • On the 1 hour there is also NMD and a small scale 1-2 retrace prior to the channel line breakout (unconfirmed)

My analysis on the other 2 legs of the Triad suggest a strong rally for GBP followed by a stronger bearish move on EUR so this EURGBP move is consistent, which is why I track the Triad.  The one watch out is a possible final leg up to test the Weekly chart channel that was broken back in early 2019.

EURGBP-Daily_050619.thumb.png.5dd689acae9008cfb28adad7d9488597.pngEURGBP-1-hour_050619.thumb.png.3839f2f7fb3c35aa23a30b4109ca0735.png 

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One hour chart is shaping up to back up the Bearish move I noted in previous posts.  Nice mini rally off the ST support & failed retest of the recent breakout zone.  Current move down is strong but there are several ST support zones to punch through before this thing really gets going.  I would be expecting a 1-5 form Bearish move followed by a significant retrace on the Daily chart before the meat of any long term Bear takes hold.  In my Triad assessment this would coincide with major Bearish phases for EURUSD and GBPUSD, just far worse for EUR.  I have posted on my Fundamentals assessment supporting these scenarios previously in other posts but it can be summarised as follows:

  • Big market meltdown - USD rally in flight to safety
  • GBP balance of payments is bad, the UK needs a reset.  This will come from Brexit freedoms and a lower pound driving exports but will take a few years, hence GBP down while USD rallies
  • EURO is a basket case, essentially a basket currency with too wide a range of underlying parts (Greece to Germany and everything in between).  The middle of the road economies such as Spain and Italy are heading south.  There is no unifying central bank with a clear mandate and no government that can impact economic policy across the geography.  Countries like Greece need to devalue  to reset.  There are too many subsidies and too much bureaucracy, fueling crazy situations like Greek government workers retiring on full pensions in their early 50s.  Totally unsustainable $%!&fest.  Cue meltdown triggered by Brexit perhaps or more likely more chaos on Greece.

 

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Another leg up then and two 1 hour chart retests of my Weekly Triangle resistance line (see weekly chart).  On the 1 hour chart I have a valid EWT count up to the second retest, which is being sharply rejected in this hour.  A ST lower low would be nice and a break of the Daily channel line conclusive.  There is good NMD on both the hourly and daily with Stochastic and RSI both over bought and breaking below.

Are we about to see that EURGBP swing I have been tracking?

EURGBP-1-hour_110619.thumb.png.1eae149e14d9325a75e852be75f293b4.pngEURGBP-Daily_110619.thumb.png.47c7ca45c46ad721098d3be9d162cb42.pngEURGBP-Weekly_110619.thumb.png.093525065873d3e2f91bab6b6f74580d.png

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Nice move down through the 1 hour potential ending diagonal (or channel) followed by a couple of failed retests, the second one being right on the Fib 50%, before this pair fell away to now test the Daily chart larger channel support.

A break here, after a small scale 1-2 retrace should bring up a move down to the next support level.  Medium term I expect another reasonably significant retrace before the Bear really gets going.  A rejection on the channel line will suggest another retest of resistance (or maybe another leg up) but those are scenarios 2&3 respectively for me at this point.  Let the market decide...

EURGBP-1-hour_120619.thumb.png.863a9ad72e87dc13c15556cf43afa33a.png

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EURGBP has been stuck in a consolidation zone since it apparently topped out early last week.  Obviously such a zone can break either way another small leg up for a retest of the weekly line cannot be ruled out.  However this pair does look to have broken the Daily channel line support (see hourly chart for more details).

My case for the Bearish turn is outlined in previous posts above.  Since my last post the Hourly price action has seen this par caught between a short term narrow band support/resistance with 3 failed tests of the final ending channel breakout zone (circa 8920).  This occurred along the daily channel line but the most recent price action shows a break and failed retest of this line and then a small 1-2 currently in play.  I will be looking for a break below 8870 support zone to gain confidence in a Bearish move for this pair but it is worth noting that the stop placement just above the recent highs provided for low exposure and he margin requirements is low relative to USD pairs.  If my long term prognosis is right and this pair now moves into a fairly swift move down any Shorts at current levels become self funding.  I would be expecting a fast drop in 1-5 form followed by a larger scale A-B-C retrace that then sets up a long term Bear market. 

 

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EURGBP looks to have completed a top out of the retrace rally, right on the 76/78% resistance zone and Daily channel resistance line and Weekly Triangle resistance line failed retest plus NMD with a credible A-B-C wave 2 retrace form.

On the hourly chart price has broken the daily channel line with a 1-5 wave 1 down and got stopped at the first short term support.  I might expect a small retrace and retest of the channel line to set up a stronger move down.  This is contrary to received wisdom that Brexit will mean GBP is weaker than EUR but received wisdom is often wrong and contrary positions are the best winners.  I would certainly want to see a retrace of some sort to pile in and also a conclusion of similar retraces (Bearish) on GBPUSD and EURUSD to set up fast rallies.

 

EURGBP-Daily_190619.thumb.png.1a16ddac68281158e126b9b994a5d43c.pngEURGBP-1-hour_190619.thumb.png.e7de9b3040f080473c5f232ac6a68206.png

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