You can’t always be first to the party but when it’s the best party in town, there  will be plenty of good times to go around.

UBS is out with a note advising clients to short EUR/GBP today at 0.8815 on concerns about Greece’s deficit and dovish rhetoric from the ECB. They also expect an economic recovery in the UK. They have a target of 86.00 and a stop at 89.30.

We have been watching this chart and if it makes sense fundamentally to UBS, it certainly makes sense technically to us. The target and stops seem relatively arbitrary but strike a nice balance between risk and reward, so we won’t quibble with them too much.

Here’s a look at the daily chart with the target and the stop drawn in:

We can see that a top occured around 0.94 and that morphed into a flag formation that is actually bullish but with the break of support at 0.8833, it turns ugly and points to further losses.

As a short-term trade, it takes some nerve to jump in right now. We have seen five consecutive days of declines and the technical  momentum indicators are looking severly oversold. We are reminded of AUD/JPY recenly, however, and that moved in a straight line for 11 consecutive sessions.

Conservative traders might look to sell a rebound at 0.8850, risking only 80 pips while agressive traders are likely to see a set-up that’s too good to miss, even if there is a potential for a sideways, choppy trade before we see the big move down. With UK CPI upcoming, the big move could be sooner rather than later. In any case, this is probably a party you don’t want to miss.