Breakout Plays on GBP/USD and EUR/USD

Gaaah! I’m torn between two setups! Both GBP/USD and EUR/USD are sporting sexy setups on the 1-hour timeframe. Which do you think is better?

GBP/USD

GBP/USD 1-Hour Chart

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.

EUR/USD

EUR/USD 1-Hour Chart

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!

XOXO,

Huck

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  • Stu

    I trade instinctively…I’m longing eur/usd since 1.3899 and except to TP at 1.4452

    • Stu

      Just a side note, I believe we will hit 2.000 gpb/usd by the end of 2012…

      • forexnoob

        2011 or 2012?

        • Stu

          2012…like the mayan calendar…

  • Clyder

    There’s a 61% fib line @ 16100 on the daily GBP/USD just above current price levels. Also an earlier support level which could turn resistance around same area. I like your GBP/USD call, assuming the price gets that high.

    • huck

      The trade worked out for a while, but price soon reversed. I took the EUR/USD one and ended up being whipsawed. Ah, trading. This is my first loss in three weeks! Bummer! :(

      • Stu

        Wow…you’re good, one loss in three weeks? What time frame do you usually trade?

        • huck

          I’m not good! Just had a good run these last few weeks. You can check my past entries for that! :) I usually trade 1 hour and 4 hour charts.

  • Hush

    I think the EUR/USD is better coz its the one thats likely to be more influenced by the outcome of the EU summit.