EUR/GBP: Potential Short Term Buy Opportunity

We have been talking about EUR/GBP for quite some time, and now I think the pair is likely to form a bottom soon. There is a bullish hidden divergence forming on the daily chart as seen in the chart below, and the pair is also approaching some of the critical support levels. So, I think we should look to buy EUR/GBP from the lower levels.

EUR/GBP Chart" title="EUR/GBP Chart" height="703" width="972">
There is a divergence forming on the 4 hour chart as well. So, we will look to buy EUR/GBP from any of the support levels such as 0.8410 and 0.8390 as shown in the chart below. In order to jump into a buy trade, we need the pair to drop a bit lower at around these levels, make a stop and form a divergence on the 1 hour chart along with a bullish candle pattern on the 1 hour.
EUR/GBP " title="EUR/GBP " height="703" width="972">
Initial target should be around the down-move trend line as plotted on the chart below and final target could be around the last highs. Stop should be placed below the last low.
EUR/GBP Chart" title="EUR/GBP Chart" height="703" width="972">
Reviewing yesterday’s events and trades
Some of the key fundamental data was released from the Euro zone yesterday, including German, French and Italian manufacturing PMI, which remained steady around the expected levels. Euro zone composite PMI too remained at 51.3 as expected. Furthermore, UK construction PMI jumped 0.5 points higher from 58.9 to 59.4, which helped GBP/USD to recover some of the lost ground. Earlier in the Asian session, RBA announced the interest rates with no change at 2.50%, but mentioned again that exchange rates are ‘uncomfortably high’, which weighed on AUD/USD.

Fundamental Outlook for the day
Today, ISM Non-Manufacturing PMI figure is scheduled to be released for the US, which is expected to decline 0.4 points from the previous reading of 54.4. Moreover, The Investor’s Business Daily (IBD), TechnoMetrica Institute of Policy and Politics (TIPP) Economic Optimism Index rates is also lined up in the US session, which is expected to rise from 38.4 to 41.1. Other than this, New Zealand’s employment data will be released in the next Asian session with the employment rate expected to fall from 6.4% to 6.3%.

This analysis is taken from today’s Daily Market Forecast, which also includes trade opportunities on: EUR/USD, EUR/NZD, USD/CAD, EUR/CHF, NZD/USD, GOLD and DAX.