While neither the euro nor the pound gave a spectacular performance last week (both pretty much traded sideways), the euro drew first blood against the pound as the U.K. CPI failed to meet expectations. However, the pound was able to erase its losses as the euro was struck down with Greek debt concerns later in the week.
EUR/GBP gave us a pretty clear signal to sell when it approached the upper WATR… Heck, it was practically screaming “SELL ME, SUCKA!” Price was right in the area of the WATR, creating higher highs. Meanwhile, Stochastic had just crawled out of overbought territory and was creating lower highs. The bearish divergence was as clear as Pip Diddy‘s chrome dome, I’d say!
To maximize the move down, we could’ve sold at the WATR itself, adding to our position and moving our stop every 25 pips. Doing so and taking profit at the WO would have given us an end reward-to-risk ratio of 6:1.
Dang, with a payout like that, maybe I should start paying more attention to this pair!