EUR/GBP to Face Test at 0.9061?

Last updated 11/11/2009 7:05 PM EST (GMT -5) 11 Comments

Forex Trading involves high risks, with the potential for substantial losses and is not suitable for all persons. Past performance is not necessarily indicative of future results.

Bradley W. Gareiss

Technical Analyst, GFT

A bearish Gartley is forming on the EUR/GBP 2hr Chart. The pattern is also a potential double top. The 8hr Chart has been in a downtrend and the trade would enter near the bearish trend line. Although the trend line has broken, it is not uncommon for a bearish trend line to temporarily break before providing further resistance. Veteran readers will likely notice there was also a long bar in the CD leg, but it was early in the leg. The pair retraced down a bit and is now slowly moving to the entry, therefore this long bar is not a deal breaker. It is also possible that a very small bearish butterfly could form if the pair drops near 0.9020 and rallies back up to the entry. Regardless, this could be a solid opportunity.

We will look to sell the EUR/GBP if it rises to 0.9061 (Point D). Point D is located at the convergence of the following points:

Since this trade is close to our entry, there are not many ways it could be invalidated. If the pair drops to 0.9010 before entering at 0.9061, then the trade is invalidated. Also, the trade is obviously invalidated if it is stopped out above 0.9086.

To recap, we will look to sell the EUR/GBP at 0.9061 with our stop placed at 0.9086. Our initial profit targets are 0.9024 (38.2% of CD) and 0.8994 (61.8% of CD).

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  • 8hr Chart - Trade would complete just above the bearish trend line.
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  • 2min Chart - Bearish Gartley; sell at 0.9061.

Comments (11)

enslinFX

November 12, 2009 at 03:30 AM ET

I'm of the opinion that the longer term trend is Long and that break of 90.60/70 may signal a continuation of the trend. Especially after yesterday's BOE report and KIng comments. Again fundamantals vs tech's - I think one should consider both when trading as both impact the trading decision.

enslinFX

November 12, 2009 at 04:23 AM ET

Looks like 90.60/70 gonna take some beating...

bgareiss

November 13, 2009 at 02:35 PM ET

The trend is usually subjective based on the time frame you are looking at. We attempt to sell near bearish trend lines and buy near bullish trend line, which is what happened in this case. As far as using technical and fundamental analysis simultaneously, I find it nearly impossible to always be consistent doing that. Of course everyone has their own style, but I find it much easier to be objective and consistent using technical analysis. Brad

DMW

November 12, 2009 at 02:36 PM ET

Brad

Great trade - .9061 turned out to be almost the exact top and position closed in a few hours. All this involving GBP, a currency I never feel entirely safe in

Thanks!

bgareiss

November 13, 2009 at 02:38 PM ET

Thanks. Although I am not sure why you don't feel safe with the GBP; all liquid currency pairs work about the same within these patterns. Brad

Demax

November 12, 2009 at 03:46 AM ET

Looks like the EUR/GBP entered recently and that the other 2 'watchables' GBP/JPY and GBP/USD are possibles too in the near future.

Here's my question.

Since all three potential trades depend on sterling, wouldn't it be prudent to only play the first trade from a risk pov?

bgareiss

November 13, 2009 at 02:36 PM ET

That is up to you. But I typically don't like putting the "full risk" on each trade if they are closely correlated. Brad

phi

November 11, 2009 at 09:08 PM ET

I noticed you are not using RSI. Is there a reason?

Thanks

bgareiss

November 11, 2009 at 09:20 PM ET

I never really used RSI much to begin with, it was a confirmation tool at best. Since it never impacted my trades in a meaningful way, I think it is best I no longer put in on the charts. Basically, I don't want to risk misleading anyone the significance I put on RSI. Good catch, by the way. Brad

amif

November 12, 2009 at 08:49 AM ET

How do you calculate your targets for gartley? Some experts suggest to use 1.27 to 1.67 of AD projection. Aren't you missing a lot of the potential move?

bgareiss

November 13, 2009 at 02:28 PM ET

I use the levels I use because my experience and testing tells me to. We may miss some larger moves, but we also miss a lot of potential losses. Brad

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