EURGBP: Lower-low for 3rd day straight on lower support line of bearish channel
The daily candle chart below shows the price history of the Euro currency (EUR) versus the Great British pound (GBP), known as EURGBP, and having last traded at .8097 as the trading week came to a close just hours ago.
Last time we wrote about the EURGBP in this series, the bearish downtrend was described as intact, and a target of .8000 was also mentioned.
The failure of the very long term bullish trend line (point 7 in green) was also blamed on not providing any reversal of the downtrend, and since then after prices moved towards current levels support has been found on the lower line of the medium term bearish channel (point 6 in red) with today's low reaching .8080. The fact that each of the last three days had lower-lows, confirms the downward angle of the bearish support line.
If this support line were to fail, the bearish momentum would become steeper very fast, whereas support foudn on this lower line could provide a stronger bounce - although that hasn't yet happened over the last three days that this line was tested.Therefore, this line may be followed closely by traders to determine whether are reversal or continuation may follow.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .8105 with a Limit to take profit @ .8144 and a stop-loss @ .8071 Risk/Reward Summary: Limit risk = +39 pips profit / (-34) Stop-loss risk = Gain to Loss ratio = 1.14
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .8069 with a Limit to take profit @ .8029 and a stop-loss @ .8099 Risk/Reward Summary: Limit risk = +40 pips profit / (-30) Stop-loss risk = Gain to Loss Ratio = 1.33
Medium term daily candle chart: