EURGBP: Downward pressure on EUR/USD coupled with a recovery in GBP/USD could help pullback develop in cross pair
The daily candle chart below shows the price history of the Euro currency (EUR) versus the Great British pound (GBP), known as EURGBP. Today this pair is trading near .7167 around time of publication.
Last time EURGBP was reviewed in Ideas You Can Trade early last month - the situation in Greece was already escalating and the EURGBP pair reached the upper resistance line of a steeper bearish channel (see point 3 on chart below in magenta color) where as reversal was expected.
Since then the pair had a few false-breakouts around that line as volatility was building before it dropped and reached .7000 on June 29th and then recovered towards current levels.
The only driver of recent bullish momentum in the pair in the last few days was the weakness in the GBPUSD pair coupled with the EUR/USD holding within a range. If the surmounting selling pressure in EUR/USD weakens the Euro currency coupled with a strengthening of the GBP/USD then the EUR/GBP should fall quickly back towards .7000 in the short 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” @ .7224 with a Limit to take profit @ .7254 and a stop-loss @ .7204 Risk/Reward Summary: Limit risk = +30 pips profit / (-20) Stop-loss risk = Gain to Loss ratio = 1.50
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .7150 with a Limit to take profit @ .7001 and a stop-loss @ .7299 Risk/Reward Summary: Limit risk = +149 pips profit / (-149) Stop-loss risk = Gain to Loss Ratio = 1.00
Medium Term Daily Candle Chart:
Medium Term Daily Candle Chart (zoomed-out):