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Got a textbook technical short setup on EUR/GBP that I gotta take a swing at. Is the most recent pullback a new opportunity to play the forex downtrend?

EUR/GBP 4 Hour Forex Chart
EUR/GBP 4 Hour Forex Chart

Again, we’re seeing a textbook trend-pullback setup on EUR/GBP as the pair pops higher after hitting lows around .6950 last week. A part of that is probably some euro strength with the focus waning a bit on Greece, and maybe a little bit of that weak retail sales data that we saw from the U.K. during the Thursday morning London session.

Whatever the case may be, the market is back to retesting an abundance of potential resistance arguments: falling trendline, falling moving averages, Fibonacci retracement area, and an area of previous minor interest. Also, we’re seeing the stochastic indicator showing potentially overbought conditions.

Will they all draw in sellers into the longer-term downtrend?  I don’t know, but the probability is good enough for me to throw up some really small positions in case this is the short-term top.  Here’s what I’m doing:

Short quarter position EUR/GBP at .7100, stop at .7250, profit target at .6950
Short quarter position EUR/GBP at .7150, stop at .7250, profit target at .6950

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

I’m only risking 0.50% of my account on this one if both positions are triggered and with this trade structure, I have a potential reward-to-risk ratio of about 2.66:1. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned!

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