It took a while but my patience finally paid off on this trade!
EUR/GBP shot off higher late last week as the pound sold off across the charts thanks to poor economic data and overall risk aversion.
If you take a look at GBP/USD, it dropped NINE consecutive days at one point!
But the real Paul Pierce-like dagger that helped my trade was what happened after the release of the U.S. NFP report.
With the dollar dropping on poor employment figures, euro bulls took advantage, allowing EUR/USD to rally on Friday.
By Monday, many traders were hopping on the long euro retracement, giving nice support to euro crosses and helping my trade out in the process. Eventually, my profit target at .8100 was hit and I made some decent bank! Boo yeah!
Profit target hit at .8100: +90 pips / +0.90%
I think the one thing that I’m most happy about with this trade is that I went home with a 1.8:1 reward-to-risk ratio. It was a countertrend setup, so it only made sense that I take it given that the reward was worth the risk.
Congratulations to those of you who took this trade along with me!
After dropping all the way back down to set a low at .7950, EUR/GBP has recovered over the past few trading days and even filled that massive gap from a couple of weeks back. Are the bulls gearing up for a major comeback?
Before I get ahead of myself, lemme just point out that this is a COUNTERTREND setup.The euro has been one of the weaker currencies over the past month as Greek political concerns and Spanish bank woes have plagued the shared currency. That’s why EUR/GBP has dropped 500 pips from its 2012 highs.
Still, I think there’s some potential for all the euro bearishness to ease up over the next few trading days.
Today, we’ve got an important meeting between newly elected French President Francois Hollande and German Chancellor Angela Merkel. Despite their differences, they’ve both expressed optimism that EU leaders could work together to keep Greece in the eurozone.
Other data to keep an eye on are the U.K. retail sales and BOE meeting minutes. Seeing as how retail sales growth is projected to drop from 1.8% to -0.8% last month and with how dovish BOE officials have been, I wouldn’t be surprised to see the pound sell off later.
As for technicals, this is the reason why I got tempted to put on a position in the first place! Right now, I’ve got my eye focused on the .8000 to .8010 price area.
Not only does this line up with the 61.8% Fibonacci retracement level, but it has also generated interest in the past couple of weeks.
That said, I’m willing to take my chances on this countertrend setup but will only be risking 0.50% of my account on the trade. As for my profit target, I’m aiming for the recent high at .8100.
Here’s what I’ve got up my sleeve:
Long EUR/GBP at .8010, stop at .7060, take profit at .8100.
Once again, lemme just point out that this is a countertrend setup – it might not be for everybody!
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