The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.
Daily oscillators are at stretched levels and as we highlighted yesterday we would not chase the move lower, with EUR/GBP failing to close below the April and May lows around 0.8400.
We are seeing negative divergence on the daily stochastic, suggesting a reversal could be on the cards, while we have also seen the second hammer exhaustion pattern in the last four days. In UK trade tonight (19:00) we hear from a number of BoE officials and the prospect of these members (including Mark Carney) pushing back on rate expectations is real. Sterling could sell off in this environment.
We continue to feel the pair could trade lower over the medium-term, but given its oversold nature, we believe traders could sell rallies. Given the level of strong support seen under 0.8400, we also feel aggressive traders could look to buy at spot levels (0.8412), with a stop at 0.8380 and a potential target of 0.8475. This would take us to our proposed sell limit level.