Looking at the charts, we see that GBP/USD is consolidating. I don’t know if it’s just me, but I think the pair is actually forming a rising wedge. According to the awesome School of Pipsology, this particular chart pattern is considered bearish. Making the pair even more tempting to short is Stochastic, being in the overbought area.
I’m thinking of setting a sell order at 1.6050 or maybe wait for the pair to breakout first and sell at around 1.5950.
We don’t have any tier 1 data on tap from the U.K. today. And so, pound bears will probably take their cue from market sentiment. If risk aversion dictates price action, we’ll most likely see the pair drop to 1.5850.
Now, let me talk about my trade idea on EUR/USD.
My EUR/USD trade idea has a similar concept. The pair has been consolidating and I think it’s about to burst soon. There is very little doubt in my mind with that regard, so the real question for me is “which way?”
On the one hand, the pair could break out to the upside since 1.4000 is a major psychological level. A break of 1.4000 could catapult the pair to new highs. On the other hand, the pair’s move up looks extremely overextended, with the Stochastic in the daily chart showing overbought conditions.
Whether the two pairs break up or down of their consolidation will probably depend on the result of the EU summit. If Germany, France, and the rest of the major euro zone nations manage to come up with a definitive solution to the debt crisis, then a break of 1.4000 on EUR/USD is likely. However, if it ends in disagreement or nothing happens, then I foresee a break of 1.3800.
In any case, I’ll be sure to ride the wave on EUR/USD whichever it goes. I’ll set up two orders, one above the 1.3850 resistance and another below the 1.3850 level. That way, I’ll get in a high probability trade no matter what happens!
Which trade setup do you like better? Let me know by casting your vote below!