Both GBP and the Euro have been trading in an uptrend against the USD recently, but the Euro has been a bit stronger over the last couple of weeks, which has forced EUR/GBP to trade higher.
In the last couple of days though, we have been seeing this forex pair slide slowly lower. There haven´t been any particular reason for this, the economic data from the Eurozone this morning has been sort of mixed. Although, the Euro is substantially higher since a few hours ago, so that´s not the reason for the EUR/GBP decline.
We´re approaching the 50 SMA
So, this latest EUR/GBP pullback lower is due to 2 factors: first, a retrace is overdue technically on the H4 chart and as you can see from it, that retrace is underway as I speak.
The second reason is the month-end flows. There are month end cash flows taking place during the last few days of the month. So, money is changing hands between EU and the UK and that´s being reflected somewhat in EUR/GBP.
Although, this retrace lower might be coming to an end. Stochastic is oversold on the H4 chart and the price seems to be turning up at the moment.
So, this is a good chance to consider going long on this pair, but I´d prefer to see the price closer to the 50 SMA (yellow) before pulling the trigger because risk/reward ratio would be a lot better for us.
If we do get closer to that moving average I will be persuaded to open a short term buy forex signal, although you can also try long term trades because there´s at least a 100 pip potential trade here until the high from Friday.
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