Hello traders!
The power of hindsight is a great tool, but there are certainly diverse interpretations of past price history…
I am doing further testing on this pair, and I must first of all admit to having an interest in this as I am actually long
on it (crazy as it may seem); as part of this, I am first going to reflect on my past analyses:
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http://forums.babypips.com/forextown/60757-eur-gbp-forecast-2014-medium-long-term-technical-analysis.html
Here I was forecasting that we could be testing the Fibonacci retracement at 0.79(xx) or lower, and I even tried
a cycle perspective on it with July 2014 for as low as 0.75(xx); as I write this, we are currently seeing the pair at 0.7925;
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in the YouTube video from the current thread (page 1), YouTube, I was also forecasting a test of the 0.75(xx) level, but I had
put it around the April-May 2014 period, which was premature; however, the downward channel, spanning over 1,000
pips, was an accurate assessment;
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in the picture below, which I created in the last two days, I see another cycle, and one that actually also confirms
the possibility of further movement to the downside but only in the short term, with a large correction to the upside
spanning anything from 250 pips to 1,000 pips (depending on changing fundamentals):
What you see here is the EUR/GBP pair showing a four-year cycle, from 03 July 2009 to 03 July 2013, with black (bullish)
and red (bearish) lines joining the start of each July point; the movement shows the following characteristics:
a) the fulcrum, at 0.85(xx), is also (coincidentally) around the middle-way point between the cycle high (0.94(xx)) and low
(0.7750); I argue that the next significant movement between July 2014 and July 2015 will be a bullish one, with the
pair aiming to exhaust the bearish channel/trend and targeting or surpassing said fulcrum (0.85(xx));
b) some of the July-to-July yearly movements included swings in the direction opposite to the overall movement, and the overall
ranges follow a pattern, as listed here (values are approximated to round numbers):
Period A: July 2009 - July 2010: overall range of 1,250 pips;
Period B: July 2010 - July 2011: overall range of 750 pips;
Period C: July 2011 - July 2012: overall range of 1,250 pips;
Period D: July 2012 - July 2013: overall range of 1,000 pips.
The differences are:
A to B = 500 pips;
B to C = 500 pips
C to D = 250 pips.
This regularity shows that the cyclic nature is not a coincidence, as it rests on certain strong boundaries within this pair, given
by historic levels/areas of demand (‘support’) and supply (‘resistance’).
What happened between July 2013 and July 2014? Well, the range was of 750 pips, which was the same as in Period B,
and we have seen a return to the July 2012 level, in a near-perfect symmetrical triangle, with July 2013 as the apex;
what I see now is the following possibility:
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Stage 1: the pair moves from 0.8000 down to as much as 250 pips, aiming for (but not necessarily achieving) the cycle
low at 0.77(50); in the article that I wrote last December, I said that
"[I]Another cyclic aspect for this pair finds its fulcrum in the 0.77(xx) figure: this represents the mid
way,mathematical half between the lowest level (in 2000) and the highest one (in2008) of the EUR/GBP pair
for the last two decades: the July 2012 test of this level (coinciding with our descending channel floor)
represents the exact half way point of a retracement of this eight year, c.4,100 pip rise (...)[/I]".
Indeed, if and when we should reach the 0.7750 or 0.7700 level, we would be in an interesting position, but
this is where I foresee also the bullish scenario, long-term, as in Stage 2 below;
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Stage 2: at or before the 0.7750, the pair moves up to aim for the 0.85(xx) level, which is the four-year cycle fulcrum;
if the pair moved in reverse, symmetrically, to its first cycle, then we would first need to look at the cycle’s four period
movements, end-to-end (i.e. from July to July of each twelve-month part of the cycle):
Period A: BEARISH / 250 pips ;
Period B: BULLISH / 750 pips ;
Period C: BEARISH / 1,000 pips;
Period D: BULLISH / 500 pips.
Reversing this we would have the following:
Period D(1), July 2013 to July 2014: BEARISH / 500 pips;
Period C(1): July 2014 to July 2015: BULLISH / 1,000 pips;
Period B(1): July 2015 to July 2016: BEARISH / 750 pips;
Period A(1): July 2016 to July 2017: BULLISH / 250 pips.
Period D(1) has already come to pass, and it has indeed delivered the 500-pip bearish move; if, therefore,
we took as true the next move, namely as in Period C(1), we would see the pair aiming to go from 0.80(xx) of the beginning
of July 2014 to 0.90(xx) by July 2015, which is the peak at the beginning of July 2011.
There are indeed unforeseen events that can reverse a strong trend such as the current one in EUR/GBP: a housing bubble bursting, a Scottish independence becoming reality (think of oil revenue losses tothe ‘UK plc’ economy, for one), a European
renaissance under Renzi’s leadership, a Fed rate hike grabbing investor sentiment by surprise and sinking the GBP/USD value,
a geo-political crisis somewhere in the world that changes current thinking around the Euro-Dollar-Pound balancing game
of probabilities… The list is endless: of course, just as much as we can predict this pair sinking lower and lower for another
2,050 pips from 0.77(xx), and rising to the 0.90(xx) level or beyond, we can also accept that nobody can predict the future, and
we could well see a period where all previous forecasts become nullified by any number of events, including a second market
crash that nobody could prevent, or a global conflict, or a reform of the currency markets and banking, or whatever.
I hope you enjoyed reading this and that it stimulated your thinking.
Happy trading.
