EURGBP: Support Line of Medium Term bearish Channel Proving as Resistance To Upside
The daily candle chart below shows the price history of the Euro currency (EUR) versus the Great British pound (GBP). This pair is known as EURGBP, and is trading near .7929 around time of publication today.
Over the past few months since exiting the lower side of the medium term bearish channel, the pair has attempted on multiple occasions to regain the lower support line of that bearish channel and has met resistance on that line, and as reviewed in the last post about EURGBP in the Ideas You Can Trade series.
If the medium term bearish channel cannot be regained a bearish continuation should follow with the next target the July low of .7872. Whereas, if the resistance met on the lower support line of the channel can be overcome a more sustained bullish recovery should follow.
A divergence in the underlying major currencies involved in this cross pair, both EUR and GBP against the USD for example could cause a larger degree of volatility, as both GBP/USD and EUR/USD have almost proportionally weakened in recent days (i.e. if EUR/USD weakens further but GBP/USD recovers that would cause such divergence or vice versa).
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .7994 with a Limit to take profit @ .8025 and a stop-loss @ .7969 Risk/Reward Summary: Limit risk = +31 pips profit / (-25) Stop-loss risk = Gain to Loss ratio = 1.24
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .7894 with a Limit to take profit @ .7871 and a stop-loss @ .7917 Risk/Reward Summary: Limit risk = +23 pips profit / (-23) Stop-loss risk = Gain to Loss Ratio = 1.00
Medium Term Daily Candle Chart: