ECB Governing Council euro/ pound selling strategy! ~ January 24 strategy ~

◎ Strategy

EUR/GBP Sell Strategy

Entry timing → After Draghi press conference

Entry below 0.8750

Stop 0.8880

Take profit target 0.8400

Looking at EUR/GBP on the daily chart, it appears to be near the lower end of a range. Since the range lower boundary at 0.8700 was breached twice today, the support wall seems thinner. Given the fundamental backdrop, I expect continued downside, so I plan to go for a breakout entry.

After the breakout, I aim for the next level on the weekly chart, 0.8400. However, note that depending on Brexit developments, the downside could end quickly, so I would like to trail stops in finer steps.

EUR/GBP Timeframe Chart

 EUR/GBP Daily Chart

 EUR/GBP Weekly Chart

◎ Points of Attention at the ECB Governing Council

Entry timing is after the Draghi press conference, but entering beforehand should be fine as long as a stop is set. Still, confirming after the event may yield better precision.

Today the ECB Governing Council is meeting. Policy rates are expected to stay unchanged, but the focus is on the following three items.

1) Change in rate hike timing

At last year’s ECB meeting, they mentioned the possibility of a rate hike in the autumn or later. We will be watching for any indication of delaying rate hikes this year or into next year.

2) Mention of economic slowdown

Attention will be on whether there is mention of a slowdown in euro area economic indicators recently. If there is mention of a recession, we will also focus on whether it is transitory.

3) About easing policy

It is unlikely they will restart QE, which ended in January this year. However, LTRO or TLTRO has been rumored and could be possible. If LTRO or TLTRO is introduced, I will pay attention to the start timing and duration.

For LTRO and TLTRO, please see below↓↓↓

“LTRO” and “TLTRO” – ECB easing measures! FX Glossary

◎ Outlook and Interpretation

Basically, I think there is almost zero chance of hawkish surprises. If any of the above points is mentioned, I would interpret it as a tilt to dovish, which would imply euro selling.

As an addendum, today’s economic indicators.

France

Manufacturing PMI Forecast: 50.0 Actual: 51.2

Services PMIForecast: 50.6 Actual: 47.5

Composite PMIForecast: 51.0 Actual: 47.9

Germany

Manufacturing PMIForecast: 51.4 Actual: 49.9

Services PMI Forecast: 52.2 Actual: 53.1

Composite PMI Forecast: 51.9 Actual: 52.1

Overall, weakness appears more noticeable.