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EURGBP Technical Analysis

This is a discussion on EURGBP Technical Analysis within the Forex Trading forums, part of the Trading Forum category; An "Audacious" Long Set-up in EUR/GBP Talking Points: Possible End of a Six-Month Elliott Structure The Case for an Impulsive ...

          
   
  1. #1
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    EURGBP Technical Analysis

    An "Audacious" Long Set-up in EUR/GBP

    Talking Points:

    • Possible End of a Six-Month Elliott Structure
    • The Case for an Impulsive EUR/GBP Upside Move
    • Step-by-Step Parameters for Taking This Trade


    While EURGBP isn’t a pair we typically enjoy trading, sometimes a structure is presented that’s just too hard to ignore. Today, we see a potential trade that’s based on analysis from both the daily and hourly time frames. Together, they provide an opportunity to try to buy a “bottom,” which is, admittedly, a perennially dangerous task in itself.

    The below daily chart of EURGBP shows our Elliott wave count starting in August 2013 and extending into late January. It’s an Elliott Wave diagonal, a five-wave structure where all five legs comprise three waves each. By definition, it makes progress in an overlapping manner. Here, the fourth leg must move back into the area of the second leg. This makes it different from the more common motive structure called an impulse, whose fourth wave cannot (in theory) intrude into the area of the second wave.

    Guest Commentary: Diagonal Pattern on EUR/GBP Daily Chart



    While the overlapping requirement makes it different from an impulse, there’s an important attribute that both types of motive waves share: the third wave must never be the shortest of waves one, three, and five. By itself, that’s a key component that makes the structure very tradable.

    In this case, the first wave was 437 pips and the third wave was 333 pips. This rule means that the fifth wave cannot be 333 pips or larger because that would make the third wave the shortest of waves one, three, and five. With that, the fifth leg needed to stay above 0.8130.

    Though many traders will trade in the opposite direction to the fifth leg as it approaches a level like 0.8130 (in this case, EURGBP reached a low of 0.8167) and place their stop a little behind 0.8130. We chose to wait, however.

    There are two other attributes of Elliott wave diagonals that give us greater confidence that we’ve labelled this structure correctly:

    • In many cases, the fourth wave pulls back 61.8% of the third wave, and this occurred (see 4 vs. 3 Fibonacci ratio).
    • Another common trait among diagonals is that they change direction quite sharply. While this hasn’t happened yet, we may see a sharp move higher and away from the 0.82 level over the next few weeks.


    Therefore, factoring these traits in as well, we’re keen to try to buy a possible bottom while price is still in this area.

    As mentioned, we chose to wait instead of buying EURGBP as it approached 0.8130 because we wanted to see if there was any evidence of an impulsive move to the upside. And, to that point, the hourly chart below shows a sharp, five-wave impulsive move higher (see blue wave (i)) followed by what seems to be a comparatively prolonged WXY zig-zag correction (see blue wave (ii)).

    Price recently tested the 78.6% retracement of the impulsive move higher (sometimes called “the last line in the sand”). The low of the correction was near the WXY equality level (see Fib Y vs. W: 100%) and also perfectly aligned the smaller-degree ABC zig-zag equality level. In light of this, the decision to wait and analyze more price action now gives greater confidence when placing a trade.

    Guest Commentary: The Case for a Bottom in EUR/GBP



    While we could have traded late in the blue wave (ii) pullback, we waited once more for an impulsive rise. That occurred in the form of yellow wave i, and we’re now going to buy the pair during the yellow wave ii pullback.

    Therefore, the trade is to buy EURGBP at 0.8265 (or lower), placing a stop at the low of blue wave ii (0.8185). For this 80-pip stop, we’re not setting a target at this time, but we’re potentially looking at hundreds of pips, and as a result, this trade will take many weeks to complete.

    The risk profile is very good, but there is real risk in this trade. EURGBP has fallen 600 pips over the last six months, and it takes some audacity to try to call a bottom. If price continues higher, though, we will look to add to this in time.

    Long Set-up for EUR/GBP

    • Trade: Buy EURGBP at 0.8265 (or lower)
    • Stop Loss: Place stop at 0.8185
    • Target: Open (for reasons discussed above)


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    A EUR/GBP Set-up with Confluent Long Signals

    Talking Points:

    • Potential False Breakout for EUR/GBP
    • Gartley Pattern Completing on Daily Chart
    • Structuring a Trade with "Exceptionally" Low Risk


    As many major currencies continue to fluctuate within consolidating patterns, EURGBP seems to be presenting quite an interesting technical trade set-up.

    The daily chart below shows a triangle breakout within a consolidation zone. At this daily level of analysis, however, the trend direction is not at all clear, and it might be fairest to call it sideways. However, interested traders may look to the weekly chart (not shown) to discover that generally bullish momentum holds true for EURGBP.

    Guest Commentary: Daily Triangle Breakout in EUR/GBP


    In a sideways market, prices are always more prone to being whipsawed, but the presence of a secondary price pattern makes this particular set-up even more interesting. Here, that comes in the form of the Gartley pattern that is now beginning to complete on the below daily chart. The first pullback respected the 61.8% retracement of the original move, and should the next leg react at the 78.6% retracement, as a standard Gartley pattern would anticipate, the resulting move would be bullish.

    Guest Commentary: Gartley Pattern Completing in EUR/GBP


    A decent move upwards to test the Gartley high could contain 180 pips or more, which is quite significant for this slow-moving pair, and that makes it all the more possible for traders of all risk appetites to structure trades with appropriate risk profile.

    The four-hour chart below readily provides a zone of support around the anticipated 78.6% Gartley reaction level, as indicated. The zone turns out to be 0.8205-0.8228, which is an exceptionally small 23 pips. More aggressive traders could simply initiate a long trade with a stop past the support zone and a stop loss of 30 pips, but it would be most preferable to wait for a trade trigger to occur on the hourly chart (not shown).

    Guest Commentary: Key Support Zone for Buying EUR/GBP


    Viable trade triggers would consist of pin bars, bullish reversal divergence, and/or bullish engulfing patterns on the hourly chart. Even though two or three attempts may be required to hop on to this move, the very favorable risk profile makes this trade highly worthwhile.

    The slow-moving nature of EURGBP can often test a trader's patience, but nonetheless, it is quite nice to see a confluence of a trend line breakout and a Gartley pattern. Afterall, the most rewarding trades often occur on the heels of such false breakouts when traders are properly positioned to trade the long side, in this case.

    By Kaye Lee, private fund trader and head trader consultant, StraightTalkTrading.com


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    EUR/GBP Technical Analysis

    Talking Points:

    • EUR/GBP Technical Strategy: Flat
    • Support: 0.8127 (falling trend line)
    • Resistance:0.8190 (23.6% Fib ret.), 0.8200, 0.8230 (38.2% Fib ret.)

    The Euro launched a recovery against the British Pound after finding support at a falling trend line connecting major swing lows since late January. Near-term resistance is in the 0.8190-0.8200 area, marked by the 23.6% Fibonacci retracement and reinforced by the formerly broken range floor. A break above that on daily closing basis exposes the 38.2% level at 0.8230. Trend line support is now at 0.8127.

    Prices are too close to relevant resistance to justify a long position from a risk/reward perspective. On the other hand, the absence of a defined bearish reversal signal warns against taking up the short side. With that in mind, we will continue to wait on the sidelines for the time being.



    --- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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    EUR/GBP Technical Analysis

    Talking Points:

    • EUR/GBP Technical Strategy: Flat
    • Support: 0.8125 (falling trend line), 0.8109 (channel floor)
    • Resistance:0.8166 (channel top), 0.8190-0.8200 (23.6% Fib ret., range floor)


    A brief Euro recovery has been overturned, with the British Pound securing its strongest close in 16 months against the single currency. Support lines up 0.8125, marked by a falling trend line set from late January, with a break below that exposing the bottom of a falling channel at 0.8109. Alternatively, reversing a daily close above the channel top at 0.8166 clears the way for a challenge of the 0.8190-0.8200 area, marked by the 23.6% Fibonacci retracement and a recently broken range floor.

    Indecisive positioning argues against taking a trade on either the long or the short side for the time being. We will remain on the sidelines, waiting for a more actionable opportunity to present itself.




    --- Written by Ilya Spivak, Currency Strategist for DailyFX.com


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    EUR/GBP Technical Analysis

    Talking Points:

    • EUR/GBP Technical Strategy: Flat
    • Support: 0.8124 (falling trend line), 0.8096 (channel floor)
    • Resistance:0.8153 (channel top), 0.8190-0.8200 (23.6% Fib ret., range floor)

    A brief Euro recovery has been overturned, with the British Pound securing its strongest close in 16 months against the single currency. Support lines up 0.8124, marked by a falling trend line set from late January, with a break below that exposing the bottom of a falling channel at 0.8096. Alternatively, a daily close above the channel top at 0.8153 clears the way for a challenge of the 0.8190-0.8200 area, marked by the 23.6% Fibonacci retracement and a recently broken range floor.

    Indecisive positioning argues against taking a trade on either the long or the short side for the time being. We will remain on the sidelines, waiting for a more actionable opportunity to present itself.



    --- Written by Ilya Spivak, Currency Strategist for DailyFX.com



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    EUR/GBP Technical Analysis

    Talking Points:

    • EUR/GBP Technical Strategy: Flat
    • Support: 0.8087 (channel floor), 8056 (100% Fib exp.)
    • Resistance:0.8104 (76.4% Fib exp.), 0.8124-33 (trend line, 61.8% Fib exp.)


    The Euro renewed its push downward against the British Pound, with prices sinking to the lowest level since January 2013. Support is seen at the bottom of a falling channel set from late April, now at 0.8087, with a break below that exposing the 100% Fibonacci expansion at 0.8056. Alternatively, a move back above the 76.4% level at 0.8104 aims for the 0.8124-33 area, marked by a falling trend line established from January and the 61.8% Fib.

    Risk/reward considerations argue against taking a trade at present withprices wedged too closely between near-term up- and down-side technical barriers. We will continue to wait on the sidelines for the time being.




    --- Written by Ilya Spivak, Currency Strategist for DailyFX.com


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    EUR/GBP Technical Analysis

    Talking Points:

    • EUR/GBP Technical Strategy: Flat
    • Support: 0.7955 (61.8% Fib exp.), 0.7908 (76.4% Fib exp.)
    • Resistance:0.7992 (50% Fib exp.), 0.8030 (38.2% Fib exp.)


    The British Pound continues its aggressive attack against the Euro, with prices sinking below the 0.80 figure. Near-term support is marked by the 61.8% Fibonacci expansionat 0.7955, with a break below that on a daily closing basis exposing the 76.4% level at 0.7908. Alternatively, a move back above the 50% Fib at 0.8030 clears the way for a challenge of the 38.2% expansion 0.8030.

    Current positioning does not offer an actionable trade setup. We will opt to remain on the sidelines for the time being, waiting for a more attractive opportunity to present itself.




    --- Written by Ilya Spivak, Currency Strategist for DailyFX.com


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    EUR/GBP Technical Analysis

    Talking Points:

    • EUR/GBP Technical Strategy: Flat
    • Support: 0.7958 (Jun 16 low)
    • Resistance:0.0.8023 (14.6% Fib ret.), 0.8062 (23.6% Fib ret.)


    The Euro has found tentative support below the 0.80 figure against the British Pound, with a bullish Piercing Line candlestick hinting a rebound is ahead. Resistance is at 0.8023, the 14.6% Fibonacci retracement, with a daily close below that targeting the 23.6% level at 0.8062. Near-term support is at 0.7958, the June 16 low.
    The ECB looks to be the most dovish of the leading central banks, putting the Euro at an inherent disadvantage against its G10 counterparts. As such, we will opt not pursue buying opportunities, looking to any corrective gains for an opening to enter short as discussed in our weekly outlook.




    --- Written by Ilya Spivak, Currency Strategist for DailyFX.com


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    EUR/GBP Technical Analysis

    Talking Points:

    • EUR/GBP Technical Strategy: Flat
    • Support: 0.7978, 0.7950, 0.7927
    • Resistance:0.8023, 0.8062, 0.8081

    The Euro may be on track to launch a rebound against the British Pound after prices put in a bullish Piercing Line candlestick pattern. Initial resistance comes in at 0.8023, the 14.6% Fibonacci retracement, with a break above that on a daily closing basis exposing the 23.6% level at 0.8062. Alternatively, a drop through the 23.6% Fib expansion at 0.7978 targets the June 16 low at 0.7958, followed by the 38.2% level at 0.7950.
    The ECB looks to be the most dovish of the leading central banks, putting the Euro at an inherent disadvantage against its G10 counterparts. As such, we will opt not pursue buying opportunities, looking to any corrective gains for an opening to enter short (as discussed in our weekly outlook).



    --- Written by Ilya Spivak, Currency Strategist for DailyFX.com


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    EUR/GBP Technical Analysis

    Talking Points:

    • EUR/GBP Technical Strategy: Flat
    • Support: 0.7929, 0.7864, 0.7812
    • Resistance:0.7968, 0.8081, 0.8134

    The Euro looks set to renew its declined against the British Pound after a period consolidation around the 0.80 figure. A break of support at 0.7968, the 14.6% Fibonacci expansion, has exposed the 23.6% level at 0.7929. A daily close below this barrier targets the 38.2% Fib at 0.7864. Alternatively, a reversal back above 0.7968 clears the way for a test of the June 25 high at 0.8033.

    While entering short is very tempting from a purely technical perspective, we will tactically opt to stand aside as the ECB rate decision looms ahead. We will continue to stand aside, waiting for event risk to pass before committing to a directional bias.



    --- Written by Ilya Spivak, Currency Strategist for DailyFX.com


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