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Forex: Ideas You Can Trade- EURGBP Near Median Crossroad of Channel

Posted by Steven Hatzakis on Oct 17, 2013 4:19:00 PM

EURGBP: Near Session Lows After Resistance on Short Term Trend-Line

The daily candle chart below shows the price history of the Euro currency (EUR) versus the Great British pound (GBP) over the medium term and trading at 8461 (as of publication).This currency pair is known as EURGBP and trading close to session lows following a sell-off in the United States dollar (USD) earlier against both the EUR and GBP currencies.

The EURUSD and GBPUSD collectively constitute the calculation of the EURGBP cross (and the combined % change in each had a corresponding % change in the EURGBP). However, barring any intraday activity for today’s session, the EURGBP pair appears at cross-road near the center of medium term bearish channel (point 6 in red on chart) where a swift move in either direction could follow.

Considering that the above mentioned channel is bearish, the likelihood of a bearish continuation away from the median line of the channel can be probable, while only a short term developing bullish channel appears to be the only potential barrier to a downward move along with a short term bearish resistance line (point 2 in magenta) which could also provide support (albeit bearish). The context of the trend of various time horizons was discussed in a previous article during early September where the momentum has since changed.

If enough support is found near today’s lows, and along the above mentioned support levels, a very short term bullish line (such as point 1 in blue) could develop with a target of the upper resistance line of the bearish channel (point 6 in red also considered long term bearish resistance).If the support lines fail, a very short term bearish resistance line (such as point 5 in yellow) could enable a target towards the support line of the medium term bearish channel (lower line of point 6).

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

1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .8511 with a Limit to take profit @ .8554 and a stop-loss @ .8482 Risk/Reward Summary: Limit risk = +43 pips profit / (-29) Stop-loss risk = Gain to Loss ratio = 1.48

2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .8442 with a Limit to take profit @ .8399 and a stop-loss @ .8476 Risk/Reward Summary:  Limit risk = +43 pips profit / (-34) Stop-loss risk = Gain to Loss Ratio = 1.26

Medium term daily candle chart:

 

eurgbpdaily oct 17 2013 note
 

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