Matt Simpson, CFTe, MSTA
CityIndex
This particular pair had dropped off of my watchlist some time ago after it failed to take the continued downwards path I had envisaged but a bearish pattern may be emerging.
Fundamentally there is a good argument for longer-term short positions based on the Yield differential alone.
As we approach the New Year and ECB finalise details on QE then we may begin the see the sustained bearish move.
Technically there is potential for a Head and Shoulders top to form on the Weekly chart and we could consider selling into any signs of weakness for a 'sell and hold strategy to also take advantage of the positive swaps.
Price has stalled below the 50 week MA and 1.60 barrier so those seeking to jump in early could be on guard now for a short position.
1.592-600 also houses the Monthly Pivot with 1.6225 seeing MR1near the November swing high. WHilst it would require a relatively large stop if placed above the swing high (over 300 pips) this could be considered as more of an investment than a trade. A tighter stop could be considered above 1.604 swing high to anticipate the 'Righ Shoulder' to have already formed and eventual downside break.
Initial target is 1.555 then 1.525 and 1.50.
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