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Forex: Ideas You Can Trade - EURGBP Bearish Momentum Accelerating

Posted by Steven Hatzakis on Sep 4, 2013 1:15:00 PM

EURGBP:  Bearish Momentum Accelerating For the Seventh Consecutive Trading Day

The daily candle chart below shows EURGBP inching lower over each of the seven past trading sessions and looking for support to ease its descent along the very short term bearish resistance line (point 5) which has contained this drop quite precisely.

The failure to hold above long term bearish resistance (point 6), medium term bullish support  (point 4), and the short term bullish channel (point 3) put the pair on a bearish trajectory along short term resistance (point 2). Then the last attempt along a very short term bullish support line (point 1) failed to correct prices, leading to the bearish continuation (point 5).

The overall bullish trend over the short term appears to have changed to bearish although the long and medium term trend may not yet be affected. Many of these elements were discussed in a previous article on the pair in early August 2013 and which have since come into play.

If the current resistance line (point 5) fails to contain the bearish momentum, then a bounce or breakout may follow and along a short term bullish support line (such as point 1) - which could develop - with a target of the long term bearish resistance line (point 6).

Currently the pair is trading near .8450 (as of publication) and just above the lower line of a regression analysis channel (point 8) which highlights the curvature of the recent change in trend.

A target of the lower support line of the bearish channel (parallel to point 6) may be targeted by mid September based on the current trajectory (of point 5) and intersecting near .8285 by that time. Contrarians may be buying in hopes of a reversal, whereas trend-follower may be selling in hopes of a bearish continuation.

 

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

1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .8488 with a Limit to take profit @ .8522 and a stop-loss @ .8468 Risk/Reward Summary: Limit risk = +34 pips profit / (-20) Stop-loss risk = Gain to Loss ratio = 1.70

2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .8433 with a Limit to take profit @ .8384 and a stop-loss @ .8463 Risk/Reward Summary:  Limit risk = +49 pips profit / (-30) Stop-loss risk = Gain to Loss Ratio = 1.63

medium term daily candle chart:

eurgbpdaily september 4 2013 note

 

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