Hello traders,
I have been following this cross pair
since late September, and here is a summary video of my angle on a possible long-term (6+ months) strategy for EUR/GBP.
Please leave feedback after you leave - I would really appreciate it.
Interesting analysis. I have a similar premise but derived from different means. I would like a bit of a retracement here then am in consideration of another short position… Also, my target is much larger… but then I would be expecting to be doing a lot of trading in E/G over the next few years.
Cheers.
Hi JavaPro… Thanks for the comment and for watching the video… Do you have a graph/chart to post, to show your set-up, indicators (if any), labels etc.?
Cheers
Here a Fibo Analysis of EUR/GBP…
The chart is a bit busy but I would like to give you a bit of an idea in regards to how I look at Targets…
Also 0.85159 is a possible retracement at which I would consider shorts (not Labeled on the chart). I use several methods to determine quality of a setup and s/r… all are not needed for me to take a longer term trade but just a list of some things I look at…
ATR(14) is at the bottom and is the only oscillator that will ever appear on my charts… Its only used to verify changes in volatility.
Everything above and below cannot fit on one chart and be useful… These are drawn up as need only to build analysis.
Setup, Targets, and S/R Quality Verification Tools:
EMA & SMA Basket (Possible Reaction Points)
Fibo Extensions
Tends Lines (Close to Close)
Analysis:
I don’t expect a move beyond Target #1 for this swing unless volatility increases then Target #2 is more valid… Long term goal is to find a new market bottom at Target #3 or Target #4… This I think will take several years with many good swing opportunities on both sides of the market. Of course this is pure speculation. Fundamentals drivers can and will change.
Cheers.
Hi HavaPro, this is excellent, thank you! I will take a look at the charts on my laptop later this evening. On a positive note, I just made yet another successful EUR/GBP trade - I decided to get out before momentum fizzled AND before tonight’s FOMC minutes being released…
The number in blue shows the profit in US dollars; the number of pips was about 33 (the Rollover was 2.40).
Happy trading!
JavaPro,
could you explain how you draw those Fibs? I only use Retracements, which show a trend line … yours are something I am unfamiliar with…
On a different note, it was interesting to see that when there was mention tonight of the possibility of a future negative rate (-0.1%) from the ECB, the pairs EUR/GBP and EUR/USD went down a fair bit, but the EUR/AUD rose; also, the CHF/JPY showed a strong correlation, diving in exactly the same way as EUR/GBP and EUR/USD…
Interesting how things are interconnected…
Taken a chance on a rising USD/JPY and capitalised on the BoJ governor’s press conference spike this morning - 5k on a 48 pip move, giving a 48USD gain.
Here is the trade:
Bursting up to the 101 level requires a fundamental spark (e.g. Taper in December), as current price is at a historically significant level (c.100.60), which was a support line from 1995 to 2008, but could now be resistance:
Trading from current price level to the upside may be too risky, although smaller moves to the upside are not to be excluded. I will wait for fundamental catalysts that support a move higher.
Happy Trading.
Extensions are just another way of stacking pulse waves on top of each other to create larger waves… For instance I spoke of the 128.6 fib. This is one of common pulse counts that can be found in the chart… Retracements are just as effective… Everything that I use with fibs are based off 38.2 50.00 61.8 level. From here I am bisecting levels less than 100 and greater than 38.2… This covers any symmetrical movements within the range. Anything greater than the range can be explained the same way as fractals being infinitely smaller and larger… One popular reaction point I have used was the 128.6 fib extension… However after recalculating everything here to present it I found this is not a pure ratio… Although 128.6 work it would be more actuate to says 123.6 I think I was adding a spread fudge factor of 5% yet it is now irrelevant in my current style of trading.
Below you will see my corrected values and how price action can react in these areas of interest. 123.6 is derived by first multiplying 61.8 x 0.382 (32.8 ratio) = 23.6 (rounded) -> + 50.0 (fair market) = 73.6 (next smallest fib reaction point above fair market) -> -> + 50.0 = 123.6 (next possible fib reaction above or below the range).
Chart 1: Price reacts around 73.6, 86.8 (Fib Bisect), and 50.0
Chart 2: Price reacts around S/R and exhibits fib extensions in both directions fulfilling 123.6 fib then reacts again off 73.6 fib from the same range.
This is just an analysis tool for me… I put more weight on s/r levels based on higher time frame closes… The same go for trend lines more weight being given to higher time frames. S/R on these charts are from the 4hr and is about as low as I will go when actually drawing a level of interest… the rest is just manual price action review.
Therefore, I put more emphasis on the extensions then retracement values and is only one aspect of what I do.
Going back to my previous post and substituting 123.6 extension for 128.6 still proves effective…
Cheers.
Well, what a week it has been! In spite of the ECB maintaining its interest rate unchanged, and adding no QE-style programme to the existing measures (i.e. LTROs), the Euro went up across the board… with it, of course, the CHF (Swiss Franc) also shot up…
My interpretation is that whatever triggered this, it was unexpected (from where I was sitting, having prepared for the event), and it is therefore a case of taking the next step, that is, looking forward to the following week: how will the market adjust around this initial, end-of-week reaction? Will it be trend-forming or just a 100-pip correction?
As my entire analysis for the Euro-Pound is currently pivoted around a bear trend, I see this as a drop in the ocean for the general down-trend for this pair: from a monthly-chart, longer-term point of view, a hundred pips are only significant in the short term, and if no follow-through is apparent in the following week, then, with a thinner liquidity towards the last two-three weeks of the trading/calendar year left, it is unlikely that such a move will reverse the five-year bear trend that we have seen with such clean technicals - see the channel in the following (monthly) chart:
Therefore, my continuing investment in this pair’s decline remains unchanged: combined with positive carry for selling the Euro versus the Pound, this pair makes for an attractive investment in the medium- to long-term, without too many surprises, provided that risk is managed and, given the size of the swings, lot sizes are kept low.
Happy trading.
PS: here is an article written today by John Kicklighter (Chief Strategist at DailyFX), which covers in more depth some of the concepts I was outlining:
Euro Avoids Stimulus-Led Collapse but a Strong Rally Unlikely | DailyFX