Still keeping my eye on EUR:GBP with the emphasis of taking an eventual position on the short side. I’ve not quite lined up an ideal entry for this trade but there are a few points of interest worth noting in preparation for the trade.
Firstly, the Weekly chart shows that price has found support on the Weekly down trend line originating from the 2009 highs. Further arguments for the bullish side include the fact that price is above the Weekly bull/bear “line in the sand” I’ve annotated at 0.8664. Beyond this, we could also argue that there is a possibility that the current Weekly falling Wedge is a bullish formation that could break out to the upside – shown in the chart as the small red trend line.
However, we must always assume that a falling wedge is not a bullish formation until a breakout has proven itself and therefore my bias is ultimately for the bearish side as I type.
Last weeks Candle found itself sandwiched between the Weekly 20 and 50MA’s proving that there is still indecision as to the next direction of this pair. Realistically, a proper upside breakout is unlikely to take place before a test of the Weekly 200MA which adds comfort to the short bias for the time being.
The daily chart shows something a little more interesting in that we’ve got a good history of pattern repetition which argues for the current pattern to end with a sharp leg down, ideally to the lower horizontal support line where an unfilled gap still remains. MACD is also behaving in a similar way to the previous instance of this price formation:
For now, I’m watching this closely and will report further if and when I decide to commit to the position. We must also remain aware that the Euro Zone Crisis has created a lot of volatility in Euro Pairs and although the main trend’s have not reversed, price spikes are pretty random and can be painful if you are on the wrong side of them, so in the case of the present Euro situation stop loss placement is more important than the trade entry itself.