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Forex: Ideas You Can Trade - EURGBP breaks medium term support

Posted by Steven Hatzakis on Aug 7, 2013 10:53:00 AM

EURGBP:  Break below medium term support line

The daily candle chart below shows EURGBP breaking below medium term bullish support (point 4) after failing to hold above long term bearish resistance (point 6 on chart) for more than a few trading sessions and then following down a short term bearish resistance line (point 5)– as had been drawn in a previous article at the end of July where the breakout to the upside and potential retracement where discussed as likely events.

Currently the pair is just off session lows (near .8582 as of publication) coinciding near the support line of a medium term bullish channel (point 3) after failing to hold on a medium term bullish support line (point 4). If the support line of the medium term bullish channel (point 3) fails to stop the bearish momentum of the past week, a continuation may follow along the very short term bearish resistance line (point 5) with a target of the support line of the long term bearish channel (point 6).

If the support line of the medium term bullish channel (point3) reverses the momentum – as has previously done so- a continuation along a very short term bullish support line ( point 1) may ensue with a target of the upper resistance line of the long term bearish channel (point 6) or the or short term bearish resistance (point 2).

Below are examples of how to trade a bearish continuation or a bullish reversal:

1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .8623 with a Limit to take profit @ .8699 and a stop-loss @ .8577 Risk/Reward Summary: Limit risk = +76 pips profit / (-46) Stop-loss risk = Gain to Loss ratio = 1.65

2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .8563 with a Limit to take profit @ .8502 and a stop-loss @ .8600 Risk/Reward Summary:  Limit risk = +61 pips profit / (-37) Stop-loss risk = Gain to Loss Ratio = 1.65

 

eurgbpdaily august 7 2013 note

 

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