EURGBP: Signal of increased Bearish Momentum under Consideration as Exit Underway
The daily candle chart below shows the price history of the Euro currency (EUR) versus the Great British pound (GBP), this currency pair is known as EURGBP, and trading near .8036 around time of publication today.
Since early 2013 EURGBP has been trading within a medium term bearish channel (point 6 in red as can be seen below on the chart), and which has been the focal point of the trend since then - however, the pair has today exited the lower line of that channel.
The upper line of this channel is a long term resistance line which has been causing the trajectory of the EURGBP to head lower over the last 16 months, and in the last post about this pair in the Ideas You Can Trade series just a few days earlier this week, a lower-low was expected as the bottom support line of the channel was repeatedly tested at the end of May.
Unless the support line of the channel can be regained, the already-bearish momentum could get more aggressive, with a target near .7959 or lower coming very soon. If the lower support line of the channel is regained, it could curb the speed of the descent as well as cause a bullish reversal - and if this is a bottom - it could sustain a recovery although this looks less probable than 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” @ .8066 with a Limit to take profit @ .8098 and a stop-loss @ .8039 Risk/Reward Summary: Limit risk = +32 pips profit / (-27) Stop-loss risk = Gain to Loss ratio = 1.18
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .8025 with a Limit to take profit @ .7959 and a stop-loss @ .8063 Risk/Reward Summary: Limit risk = +66 pips profit / (-38) Stop-loss risk = Gain to Loss Ratio = 1.73
Medium term daily candle chart: