EUR/GBP: Neckline Retracement – Trade Closed

Trade Closed: 2013-2-13 03:06


Well, that didn’t last long!

Even though the U.K. CPI came in as expected at 2.7% and the core report barely missed expectations (2.3% vs. projected 2.4%), speculation began to circulate that today’s BOE Inflation Report would take a dovish tone. This, of course, meant that some traders believe that if inflation remains subdued, it would give the BOE more room for bond purchases later on.

Combining this with Draghi’s comments that fears of a currency war were out of place, it’s no wonder that EUR/GBP soared higher and hit my stop loss midway through yesterday’s London session!

Stopped out at .8620: -69 pips / -0.50%

To be honest, I didn’t quite see that happening, but I don’t have any regrets over taking this trade. The technical setup was really nice, and at that time, I really thought the Fib levels would hold. It’s not like I knew that the euro would make a decent comeback yesterday either.

So, a little slip up before V-day, but I ain’t gonna let this ruin my mood! On to the next trade!

Trade Idea: 2013-02-12 03:15

I’ve been waiting for this moment for a while now, so I didn’t hesitate to sell EUR/GBP at market once the signals lined up!


After EUR/GBP had formed a double top formation with lower highs, I had begun to develop a bearish bias for the pair. I figured it was a only a matter of time before this sucker traded lower, and lo and behold, price broke down below the .8560 neckline on Thursday, thanks to Mario Draghi’s remarks on the euro.

I held back from selling the initial drop because I wanted a better price and reward-to-risk ratio, so I sat on the sidelines and waited for this pair to retrace its footsteps. Now, it’s right where I want it to be – in a confluence zone! It’s go time, baby!

Sold at market (.8551), stop loss at .8620, profit target at .8450. Risked 0.5% of my account.

I sold in this area because we have a cluster of inflection points here:

  1. The 50% Fibonacci retracement level
  2. Former neckline support
  3. Approximately 1 full ATR from the week open

Aside from that, we got one more sign of confirmation from the spinning top that formed right in this area.

Fundamentally, I think this trade makes sense, especially since the euro has come under renewed selling pressure after Draghi expressed concern about the euro’s strength late last week. Aside from that, political issues in the euro zone have reintroduced uncertainty, which I think should cap off the euro’s gains for now. Overall, it seems to me that the shared currency still has a bit of room to fall, considering how long and extended its recent rally has lasted.

What do you guys think of this week’s trade? Is it something you would take? Hit me up with your comments below!

  • chin

    resistance broken. this trade still works?

  • Bijoymj

    I sold at 0.8600 just now. Hoping best. Here is the trade idea.

  • cyclopip

    Things didn’t turn out quite as planned, but I ain’t gonna dwell on this trade for long. On to the next one!

  • Jonathan Millet

    Nice idea! Slight gains brings relief after the slow down

  • Amit Desai

    Just a thought. You waited for a small retracement before entering the trade. At that time, how would the trade have changed if we 1) waited for stoch crossover or atleast a turn and 2) a sell stop at 0.8543 (I think that is your black line). Again, I am a newbie so the intention is to provoke thoughts and not advise. Thoughts? Comments?

    • cyclopip

      Hi bud! Thanks for sharing your thoughts! In this case, that strategy would’ve worked out well and might’ve turned this trade into a profitable one. But the thing is, I was really just looking to play a bounce off the neckline.

      I probably wouldn’t have entered a short anymore if I had witnessed price close convincingly above the blackline (as it did). Just my two cents!

      Again, thanks for dropping by!

      • Amit Desai

        Ahhh..that makes sense. Thanks for the reply.