EUR/GBP : Re-visit

• Had previously dismissed rather too casually the switching of short EUR risk to short GBP.
• This is NOT about putting on a EUR/GBP trade; it is about deciding the better counter-currency to be long USD against. Positioning for a higher USD remains the central tenet of the core book.
  
• EUR/GBP monthly (upper left) : Remains in an uptrend. Triangle consolidation now?
• EUR/GBP weekly (lower left) : If triangle consolidation, then current level 0.8740 is nearer to the bottom edge of the perceived triangle than to the upper boundary. In which case, it makes sense to temporarily adopt a range trading mentality to try and buy this. Wherever the bottom edge ends up crystallizing, the one thing I am sure about is - if we break 0.8518 (monthly chart low) then all bets on the triangle are off.
  
• EUR/USD (upper right) : Well advanced breakdown of the previous uptrend. We are currently off 8.9% [1.5024, 1.3682] from the most recent highest closing.
• GBP/USD (lower right) : Fresh break only last week, but still, is already off a large-ish 6.4% [1.6719, 1.5655] from the recent closing peak.
• Both EUR/USD and GBP/USD are bearish. Qualitative difference is that the GBP breakout is fresh; but the EUR downmove looks and feels like a 3rd wave, in which case you want to ride it for all it's worth. So - both desirable shorts.
  
• Decision : 1. Maintain SAME overall level of desired long USD core book exposure. 2. Assume the EUR/GBP triangle interpretation is correct and we are nearer to bottom of triangle now. 3. Switch 50% of short EUR risk to short GBP now ie buy EUR/GBP around 0.8740 or lower. 4. Completely switch out of EUR into GBP only if EUR/GBP breaks 0.9013 on the topside (upper triangle boundary). 5. Feel really silly and unwind 3. if EUR/GBP breaks below 0.8518. (Just pray when this arise the GBP is an opportunity loss rather than actual negative).
  
• [Long term GBP/DEM chart included here showing more obvious triangle consolidation within solid downtrend. Note how far current levels are below the time of Soros' v BOE.]