EUR/GBP Trade Idea

I think EUR/GBP is nearing completion of a massive triangle and will soon rise sharply. I have pictured an alternate bullish count which has the next move of the triangle being a C leg of D (see Alt. D) with an E down to come before another push to much higher levels. Either way I expect 0.86 to hold and for price to push higher from near current levels. The next big move up (green wave 5) will take several months to complete. I will be looking to get long from near the rising trend line support with an open target. Stops will be moved to cover profit when price has moved sufficiently higher, in case this is a B wave triangle [To see Vasan's bearish EUR/GBP count click here] or the triangle is not yet complete (see Alt. count). For all counts a bull move is expected in the short term making this a high probability and fairly safe trade.

EUR/GBP In Depth Analysis

Trade Idea Summary
Sell EUR/GBP at 0.8810
Stop at 0.8860
Target 0.8580
Risk:Reward 1:4.6

Analysis Follows
Today I have spend a considerable amount of time analyzing the EUR/GBP pair. While some of the finer details of the recent consolidation elude me, longer time frame charts seem to be paint a clearer picture. Below is a weekly chart of the pair, showing what I suspect to be an impulse move to the upside carving out it's final wave.

 

As you can see the second wave was very shallow and took quite some time, while the fourth wave was sharp and deep, following the guidelines for alternation. While it is possible that wave 4 is not yet complete, the following charts are based on the assumption that 0.84 will not be broken during the next 6 months at a minimum.

The two charts below are daily charts from the end of the above wave 3 onwards. As you can see the move so far has been quite complex. Below is my favoured count, which shows red wave 2 of 5 nearing completion, before a sharp move up in a wave 3. You can see that all the moves up seem much sharper than the moves sideways/down, which can often be a good indicator of trend direction. Click images to zoom.

My next chart is also a daily chart, offering an alternate scenario to the above count. Here I have drawn in the possibility of a triangle forming which will cause the pair to consolidate for much longer with minimal price movement.

Either way I think there are some good opportunities presenting themselves in this pair coming up in the very near future. Below is an hourly chart of the consolidation that has unfolded over the past month. As you can see this correction is also extremely complex. I have spend a long time trying to work out a count for it, however the part in the black box that I have marked out doesn't seem to fit within the rules of EW. 

Ignoring the part I could not define, I have attempted to work backwards to try and explain what is happening. The moves after the peak at 0.8842 seem to count in a 3-3-5 pattern, which is possibly an unorthodox B wave and I have labelled the chart based on this conjecture. Whether or not this count is correct, a correction will always finish in a motive C wave in the opposite direction to the prevailing trend, and I think this may be it. 

A clear impulse from the 0.8665 can clearly be seen, which I expect to complete aroung the 0.8820 Fibonacci confluence zone. The orange Fib levels are from wave 1 of C, and the blue Fib levels are from the the move I have labelled as A?. Wave A being equal to wave C and wave 1 being equal to wave 5 are both very common Fibonacci relationships.

I will be looking to short EUR/GBP from 0.8810 with my stop loss at 0.8860. If price moves above 0.8856 then my above counts are all invalid and I will have to reassess my charts. I expect a move down to around 0.8580 at least. This is just above where wave A from 0.9412 to 0.8834 is equal to wave C from 0.9154, and only just beneath the wave 3 of C extreme at 0.8603. The risk to reward ratio here is 50:230. or 1:4.6.

Getting out of my EUR/GBP Short Position

I'm getting out of my EUR/GBP short at 0.8680. Since the sharp fall from 0.8842 price movement has been stagnant. I expect the Euro will bounce back against the Pound somewhat when the EUR/USD pulls back from being so oversold. This is where I will look to get short again.

EUR/GBP

The EUR/GBP Ending Diagonal looks like it may be complete at 0.8799. I'm going to attempt to get short on a pullback to the 0.8775 area. Stop loss remains at 0.8855.

EUR/GBP Hourly Chart Update

 

Here is an update of my EUR/GBP chart from last week. The consolidation continues and I am expecting one more bounce higher in the Euro in line with a push back from the oversold zone in the EUR/USD. Once this C leg is complete expect another sharp impulse wave down. Look to sell between 0.8795 and 0.8820. Wave 2 of the larger move on the daily from 0.8850 retraced to near the 61.8% Fib, so according to the rule of alternation this retracement should only reach around the 38.2% Fib, which is a few pips below on 0.88. Keep stops at above the start of wave 2 at 0.8855.

EUR/GBP Still Consolidating

Recent price action in the EUR/GBP pair from the high at 0.877 still looks to be corrective (there is no clear impulse or LD), so I will be looking to get out of my short trade at break even or for a minimal loss. Another push above 0.877 is likely before further downside.

EUR/GBP Flat Looks Complete

Here is an update of my EUR/GBP chart. The flat the pair was forming may be complete at 0.8770 and a leading diagonal looks to have formed, beginning a new trend downwards. I have just taken a short position with a stop at 0.8760.

EUR/GBP Hourly Chart

It looks to me like an irregular flat correction is forming on the EUR/GBP pair. Price reversed very close to the 138.2% Fib level which is very common in FX markets during flat formations. Expect price head towards at least 0.88 if not slightly further before further downside. 

EUR/GBP Trade Idea

Just a quick rehash on my EUR/GBP trade from a while back. The pair looks like it wants to retest the old wedge support line at around 0.8870. Fibonacci resistance also sits very close to this zone. Look to short from here with a stop above the high at 0.9030. I will be away celebrating for most if not all of tomorrow's sessions. Happy Australia Day!

EUR/GBP Break Out!

EUR/GBP has just broken out from the wedge it has been consolidating in for the past several months, and also broken through its uptrend channel support which has been in play for several years. Wait for a pullback to resistance at around 0.888 and look to go short with a stop at 0.904. This is likely going to be a medium term hold.

EUR/GBP Wedge Breakout Imminent

The EUR/GBP price action is contained by clearly defined, converging support and resistance lines. Keep an eye out for a break in either direction, then look to buy on a pullback to the resistance line. Keep your stop loss on the other side of the wedge and move to break-even once price has moved sufficiently away for your order price. I have no current directional bias on this pair and am equally as happy for it to break to either side.

EUR/GBP Hourly Chart Update

Here is my updates chart of the EUR/GBP pair. Luckily the B wave stopped just before hitting my stop loss point at 0.8912. It looks like a further 5 wave rally up from here is likely. A good time to buy would be after a wave 2 retracement with a stop loss just below the double bottom.

Trade Idea of the Day

Long EUR/GBP from 0.8990
Stop Loss: 0.8912
Target: 0.9150