Selling the Nowotny Spike in EUR/GBP
The ECB member Nowotny delivered some hawkish comments earlier on. He said that the ECB should end the asset purchase soon as well as...
The ECB member Nowotny delivered some hawkish comments earlier on. He said that the ECB should end the asset purchase soon as well as start normalizing rates by increasing the repo rate first, from -0.4% currently to -0.2%.
We have heard ECB (European Central Bank) members talk about drying the asset purchases many times, but this is one of the first times we hear clear comments about rate hikes. The Euro got a bit excited by the comments.
That sent EUR/GBP higher on a spike. This forex pair has been on a downtrend in the last several days with decent retraces higher. But eventually, the pullbacks up have found resistance at either the 100 simple MA (green) or the 100 smooth MA (red).
The 100 SMA is providing resistance already
The spike took this pair around 35 pips higher to the 100 simple moving average. It looked like this moving average is providing resistance again so we decided to take our chances. We sold EUR/CHF at 0.8718 hoping that the spike is over and downtrend will resume soon. The stochastic indicator is almost overbought, so the retrace up will be complete.
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