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Forex: Ideas You Can Trade - EURGBP Bearish Setup as Trend Continues

Posted by Steven Hatzakis on Apr 16, 2014 8:21:00 AM

EURGBP:  Downtrend in Bearish Channel Ongoing With Latest Price Action Bearish 

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. Today prices are testing near lows reached near .8230 on April 8th and 9th, with rates currently around .8230 near session lows (of .8229 around time of publication).

If this level - around .8230 -fails to provide support to reverse the bearish momentum, it appears likely that EURGBP will make a lower-low and continue within the context of the overall medium term bearish channel.

Last time this pair was covered in the Ideas You Can Trade series, in mid-February 2014, the lower end of that channel was approaching and a reversal followed with a short term bullish bounce from that lower line. This bounce pushed EURGBP back towards current levels where it since lost momentum and hovering near the median line (middle) of the medium term channel for the last few weeks before heading lower towards current prices.  

If .8200 fails to provide a safety net for further bearish price action in the very short term, then the lower part of the channel could be re-targeted. Whereas, if any support is found and the median line of the channel is regained, it could act as (bearish) support to at least continue the descent down the bearish channel from higher prices (above current levels). Either way the trend appears bearish over both the very short term and medium term.

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

1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .8281  with a Limit to take profit @ .8299 and a stop-loss @ .8269 Risk/Reward Summary: Limit risk = +18 pips profit / (-12) Stop-loss risk = Gain to Loss ratio =  1.50

2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .8199 with a Limit to take profit @ .8145 and a stop-loss @ .8235 Risk/Reward Summary:  Limit risk = +54 pips profit / (-36) Stop-loss risk = Gain to Loss Ratio = 1.50


Medium Term Daily Candle Chart:

eurgbpdaily april 16 2014 note


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