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Day three: potential EUR/GBP trade

The EUR was hit fairly hard overnight as market tensions around a potential near-term invasion of Ukraine by Russian troops increased.

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Comments from the Polish finance minister that Russia had restored its combat readiness on the Ukraine border, coupled with comments from the Russian foreign ministry that eastern Ukraine neared a ‘humanitarian catastrophe’, were the clear catalysts.

As we have seen over the last month, the EUR and European markets are bearing the brunt of the  increased tensions and this would make clear sense given we have heard from a number of European companies that the fall in confidence in the region is hurting sales. Naturally this is going to have implications on European growth at a time when there are already clear vulnerabilities.

My potential trade idea from Monday was premised on the huge divergence in market positioning, however with tensions rising up again positioning has less of an impact on price action.

If we see a close below 0.7916 (the 61.8% retracement of the recent rally from 0.7874 to 0.7985) I will look to close the potential trade idea. I continue to hold a downside bias on AUD/USD and feel a move to the 200-day moving average at 0.9180 could potentially be on the cards. 

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