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EUR/GBP Long Opportunity at 0.8293- Correction

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Last updated 7/30/2010 7:01 PM EST (GMT -5) 3 Comments

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Bradley W. Gareiss

Technical Analyst, GFT

A bullish butterfly pattern is currently forming on the EUR/GBP 1hr Chart below. The trade has excellent symmetry in both time and price.  Additionally, the trade would enter near 50% of YZ on the 8hr Chart.  This is a textbook set up that has formed nearly perfectly.  The only concern is that the pair will see a significant gap down after the weekend.  If the pair opens near its current level after the weekend, everything should be fine though.  This trade would be invalidated if it rises to 0.8335 before entering.

We are looking to buy the EUR/GBP if it falls to 0.8293 (Point D).  Point D is located at the convergence of the following points:

To recap, we will look to buy the EUR/GBP at 0.8293 with our stop placed at 0.8269.  Our initial profit target is 0.8328 (38.2% of CD).

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  • 8hr Chart - The trade would complete just below the 50% Fibonacci retracement of YZ.
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  • 1hr Chart - Bullish butterfly; buy at 0.8293.

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 (3)

hsbc

August 02, 2010 at 08:00 AM ET

http://www.ibtimes.com/articles/39381/20100729/santander-buy-branches-uk-ipo-looms.htm

u didnt take note of m&a activities in uk

bgareiss

August 02, 2010 at 01:29 PM ET

If you look hard enough, you can find some piece of news that explains any price action. This is especially true after the price action has already occurred, as it had after your post. Regardless, I am a technical trader and only use major news announcements to make sure I avoid times that will likely be highly volatile.

Brad

NeoFX

August 03, 2010 at 01:28 AM ET

hsbc,

technically speaking, news don't matter at all! ---in my experience, I've found that all that fundamental announcements really do is simply move the prices to their already projected targets but just in a much faster and volatile pace.

not always but typically that's the case: just look at the some of the pairs trading against the JPY the last 3 months, and you'll see the drop came so suddenly (after a long period of consolidation in the AUD/JPY, EUR/JPY, etc...) and seemed as if it was never going to stop until, of course, major res levels were met and in most cases it bounced to the exact pip as where the fib level was.

Look at the AUD/CHF daily chart for instance: the recent steep drop in the pair brought prices down from 1.0200 all the way down to .8900. That's roughly 1300 pips fall. However, if you zoom out and draw your fibs from the latest big low in Sept of '09 at .7000 to the 1.0200 high, making this our up AB, you'll see that when prices did finally fall they came and kissed the 38.2% ret of this AB and then sky rocketed back up due to major support. And that's just one pair, almost all of the other majors trading against the JPY did the same thing.

And yes, if you wanna look at news perhaps this does coincide with latest poor conditions in Australia and the somewhat strange rebound of European economic sentiment.....however, the charts always do tell a story and typically they don't lie.

On a lighter note, the AUD/USD is headed towards .9200 and I believe will fall at this point with room down to .8900.

Keep an eye on it and if trendlines break at that resistance point and sell for a potential 300 pips of profit.

Keep an eye on the graph and not Bloomberg Channell!
Good Luck!!

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