After taking a drubbing for the first half of May, the EUR/GBP has been displaying price action characteristics of a bottoming as of late. First on the docket, it formed a HL (higher low), then shooting up strongly for 3 days, suggesting the buyers came in strong even though they bought the pair at a worse price. After hitting resistance at .8130, the pair regained its footing, forming a pin bar setup off the daily 20ema which is now dynamic support and where likely buyers came in strong.
The pair just needs to clear near term resistance at .8142ish which opens the way up towards .8196 and .8221. Although we are hesitant to label this a reversal of the major downtrend, short term structure is becoming more bullish by the day.
***Note the UK has a Rate Decision Tomorrow so watchful eyes on GBP related pairs post decision for possible volatility
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Global Market Commentary:
Global markets shot up massively today, with the S&P having its best day for 2012, ironically a few days after its worst, gaining 29.3pts or 2.3% and the Dow grabbing 286pts or 2.37%. Gains were made on the twin developments of hope for the ailing Spanish banks being shored up while Yellen at the fed laid out a plan for more monetary stimulus which would temporarily, bolster the markets (but eventually would fail to prop them up in a healthy way).
The Fed Beige Book also came in stronger than expected adding more hope (what we think is false hope) that things are turning around.
Regardless, a lot of the worry over Europe has been whether they have the resolution to save the EZ and the moves (or rumors of them) by the policy makers were enough to bring risk back on. We also see these moves as likely short covering with markets being heavily short with no new players coming in. Nevertheless, short term momentum has shifted so watch for short term plays before the longer trend resumes, or...the Greek election on June 17th where all hell should break loose.
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