Cross-Eyeing: EUR/GBP – Trade Closed

Trade Closed: 2008-08-27 11:44

A bit of uncharacteristic volatility today in EUR/GBP sparked off by hawkish ECB commentary, rising oil prices, and bets the UK economy is in a recession. My trade was stopped out and I took a small hit today.

Total: -57 pips/ -1.0%

So, with the pair has definitely maintained above the falling trendline, indicating we may see a further rally of the Euro against Sterling. I’m going to watch and see if the pair can stay above .8000 before making another move on EUR/GBP. Stay tuned!

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Trade Idea: 2008-08-25 17:11

So far, it looks like the falling trendline has held to start out the trading week. I have decided to short the pair for technical reasons and that I believe the recent Euro rallied has run out of steam in the short term against the Sterling. I look to:

Short EUR/GBP at market (0.7963), stop at 0.8020, pt1 at 0.7900, pt2 at 0.7800

Remember to never risk more than 1% of the a trading account on any single trade. Adjust position sizes accordingly. And remember the pip value on this pair is higher than the pip value for the EUR/USD and USD/JPY.

We do have risk events all throughout this week for both currencies, and with it being the last week of the summer volume may be light – a nice combo for excesses volatility.

Stay tuned and good luck!

Chart Watch: 2008-08-22

crosseyed chart

Good afternoon! I thought I’d do a little bit of currency cross recon before the weekend started and I like the daily chart on EUR/GBP. The recent Sterling sell off may have given traders a potential rally point against the Euro for next week’s trade.

I have the daily chart up with a falling trend line drawn across the lower highs. Will we see resistance once again? I don’t know, but the market has been pretty reactive at those points and the current sell off the British Pound against the majors may be a bit overdone (stochastics near overbought conditions) and may be due for a pull back.

Both the UK and the Eurozone are feeling the effects of the global slowdown, but which of the two is hurting worse? It appears that traders are favoring the Euro over the Sterling, but how long will we see UK weakness priced in over Euro weakness? This trendline will give us a clue as if we see a break higher, then we could see beginning of a new move higher towards .8500 – the next major resistance point. If it holds, we could see a move lower back to resistance at .7800.

I don’t plan on doing anything for now, but as soon as the market opens next week I’ll check it out once again before making a move. Have a great weekend everyone!

  • PipWolf

    I’m in on this one.

  • PipWolf

    I’m in on this one.

  • uzzi09

    Looking at your analysis, it really does make sense. I hope this one works out just fine.

  • uzzi09

    Looking at your analysis, it really does make sense. I hope this one works out just fine.

  • stevem

    Hey, Cyclopip, I’m realy new to forex and i was just wondering why you chose .8020 and not the horizontal resistance line formed by the highs on 5/21, 6/09 and almost on 7/14.

  • cyclopip

    Thanks for the comments guys. Stevem – At the time of the trade idea, that resistance level was quite a ways away in relation to the daily average true range of the pair. Instead of the resistance area, I used the ATR instead, thinking that if it surpassed that level of volatility, then a move to that area may even bring in more buyers and create enough momentum to break.

  • stevem

    Hey, Cyclopip, I’m realy new to forex and i was just wondering why you chose .8020 and not the horizontal resistance line formed by the highs on 5/21, 6/09 and almost on 7/14.

  • cyclopip

    Thanks for the comments guys. Stevem – At the time of the trade idea, that resistance level was quite a ways away in relation to the daily average true range of the pair. Instead of the resistance area, I used the ATR instead, thinking that if it surpassed that level of volatility, then a move to that area may even bring in more buyers and create enough momentum to break.

  • stevem

    Thanks for the insight. It looks like that is what is happening.

  • stevem

    Thanks for the insight. It looks like that is what is happening.