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EUR/GBP Forming Opportunity to Go Long at 0.8614

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Last updated 1/27/2010 7:49 PM EST (GMT -5) 22 Comments

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Bradley W. Gareiss

Technical Analyst, GFT

A bullish butterfly pattern is forming on the EUR/GBP 1hr Chart below.  So far the pattern has been shaping up nicely, and it could enter within the next 24 hours.  The entry would also be a the exact 78.6% Fibonacci retracement on the Weekly Chart.  It is rare that levels converge this perfectly.  There is also an argument that could be made for a longer term bullish Gartley on the Weekly Chart, but at this time we will stick with the shorter term pattern.

We are looking to buy the EUR/GBP if it falls to 0.8614 (Point D).  Point D is located at the convergence of the following points:

We will now go over what to watch for assuming the pair continues falling toward our entry at 0.8614.  If the pair moves down rapidly and has long bars near point D, we will not enter the trade.  Also, if the pair comes within 10 pips of reaching our entry, does not enter, and reaches T1 before entering, the trade is invalid.  The trade is also invalid if the pair rises above 0.8720 before hitting our entry.

To recap, we will look to buy the EUR/GBP at 0.8614 with our stop placed at 0.8582.  Our initial profit targets are 0.8663 (38.2% of CD) and 0.8697 (61.8% of CD).

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  • Weekly Chart - Trade would enter at the exact long term 78.6% Fibonacci retracement.
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  • 2hr Chart - Bullish butterfly; buy at 0.8614.

The information, including Commentary and Trade Ideas, provided on FX360.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. Global Forex Trading and FX360 .com is merely providing this information for your general information. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite. Any projections or views of the market provided by FX360.com may not prove to be accurate.

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Comments (22)

silver

January 27, 2010 at 11:00 PM ET

I am curious about your thought on EUR/JPY breaking below the support on a Nine month sideways channel. It has had a triple top on the resistance. Whats your thoughts on this pair?

Vespones

January 28, 2010 at 04:20 AM ET

Silver, buy USD and EURJPY , it will skyrocket for at least 2 weeks or so.

USDJPY reversed just at 50 % fibo from last upside movement (85 to 93)

bgareiss

January 28, 2010 at 01:32 PM ET

Silver, we have cleared out a few lows on the EUR/JPY, but there are also lows preceding those. Regardless, I do see a bullish pattern shaping up if you look at the pair on a Daily Chart. For those of you who follow this stuff regularly, it should be pretty easy to find. However, I won't post it until it gets closer to the level I would buy at as it could take weeks. Brad

bgareiss

January 28, 2010 at 01:38 PM ET

Vespones, what is your rationale behind that? I don't necessarily agree or disagree, but there must be more to it than a 50% Fibonacci retracement. Also, be careful when saying something "will" happen. Unless you have the capital to short more yen than everyone else in the world is willing to buy, there are no certainties. Brad

Vespones

January 29, 2010 at 03:17 AM ET

Brad,

You want to start laughing about my rationale ? here it is : Just because bearish trend cycle on USDJPY is over . I strongly believe that markets move on a cycle basis. Yen started to strenght about 4 years ago and the highest level was last November.

Also, you can check any fibo from any timeframe and I see a CLEAR turning point at current levels. (from 100 to 84 and from 84 to 93 )

USDJPY will hit 100 soon

Markets are not necessarily based on prices

bgareiss

February 01, 2010 at 01:25 PM ET

I am still not sure how you have determined the bearish trend is over. I am not arguing, I just am trying to see what your point of view is. I am also unclear on your Fibonacci levels. The pair hasn't touched 84 since the mid 90s. And remember that no matter how much analysis you do, you will never know for certain where a currency pair is heading. Brad

pbp

January 28, 2010 at 12:35 AM ET

does this mean that we should also look to the eur/usd pair to rally?

bgareiss

January 28, 2010 at 01:40 PM ET

No, these trades are meant as specific ideas with specific targets. Brad

FD

January 28, 2010 at 10:26 AM ET

Cracking trade Bradley - given how quickly this has reacted to the S&P news might we look slightly more long term than T2?

bgareiss

January 28, 2010 at 01:43 PM ET

"Cracking"- nice word. Once I enter a trade, I follow the plan no matter how quickly or how slowly we reach our exit points. Of course you are welcome to do whatever you'd like. However, when the markets are kind enough to give you a quick profit, I say take it. Brad

spunky

January 28, 2010 at 12:38 PM ET

Yep, nice call . I just sat here on my hands this am , and missed out waiting on tomorrows data

Again thanks

regards
Brad

bgareiss

January 28, 2010 at 01:48 PM ET

Thanks. Also, there are many, many worse things you can do in trading than sitting on your hands. Brad

margaret

January 28, 2010 at 01:23 PM ET

How do you do it!!!! Your last 2 trades, eur/nzd and eur/gbp were T1 to the fraction. Thanks!

bgareiss

January 28, 2010 at 04:11 PM ET

You're welcome. Not every trade reacts perfectly, but it sometimes happens. These setups are no different than the ones that lose. Some win, some lose, but the idea is to be profitable over the long haul. Brad

Mihai

January 28, 2010 at 03:56 PM ET

T1 reached. What do you think about T2? When should it be reached? Will it be reached?
Thank you for this great opportunity!

bgareiss

January 28, 2010 at 04:14 PM ET

I have no idea if we will hit T2 or be stopped out first. Once the trade enters, I have found it is best to sit tight and let the chips fall where they may. Brad

fishmanszmit

January 28, 2010 at 04:35 PM ET

Are we moving stop to entry Brad? I am assuming we do it now that T1 was hit

bgareiss

January 28, 2010 at 04:37 PM ET

Yes, we will be moving the stop to the entry. I will post that update a little bit later today. Brad

margaret

January 28, 2010 at 06:37 PM ET

Hey Brad. Has your AUD>USD invalidated already. i see it just dropped below the 8920 before bouncing up. Is this a true invalidation or just a bounce??

bgareiss

January 28, 2010 at 06:38 PM ET

It's invalidated. That is a risk of posting a trade that is so close to point C. Brad

hsbc

January 28, 2010 at 07:49 PM ET

Hi Brad

Do you have any techinical view on EURCHF? Thanks

bgareiss

February 01, 2010 at 01:14 PM ET

I don't have any concrete trade ideas. The big move on Friday means I will likely have to wait a while before something forms that fits within my trading plan. Brad

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