EURGBP: Lower Low Reached After Repeat of Previous Bearish Pattern
The daily candle chart below shows the price history over the medium term of the Euro currency (EUR) versus the Great British pound (GBP), known as the EURGBP pair, and is currently trading at .8191 (as of publication), after making a fresh low for 2014.
Last time the pair was covered in the Ideas You Can Trade series, the downtrend was expected to resume after the median line of the channel was reached yet again, as previously written.
Now that a lower low has been reached, support may enable the pair to return up to the median line thus repeating the trend that appears to be in place now over the medium term, and guiding short term price action back and forth between these two points (support and resistance) within the downtrend.
If support is found near today's low which hasn't been reached since early January 2013, then the pair could return back to the middle of the bearish channel (point 6 in red), that has been the focus of several of the previous posts for this pair, as noted above, along a very short term bullish support line (point 1 in blue).
Otherwise, if support doesn't hold near today's low then EURGBP may trade lower near a very long term bullish support line (point 7 in green on chart), and using the current trajectory of very short term bearish resistance (point 5 in yellow) that it has followed in the last week.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .8227 with a Limit to take profit @ .8258 and a stop-loss @ .8198 Risk/Reward Summary: Limit risk = +31 pips profit / (-29) Stop-loss risk = Gain to Loss ratio = 1.07
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .8153 with a Limit to take profit @ .8113 and a stop-loss @ .8184 Risk/Reward Summary: Limit risk = +40 pips profit / (-31) Stop-loss risk = Gain to Loss Ratio = 1.29
Medium Term Daily Candle Chart: