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EUR/GBP Buy Approaching, Attractive Risk/Reward

Last updated 10/28/2009 2:26 PM EST (GMT -5) 5 Comments

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FX360 Technical Analyst Staff

Technical Analyst, GFT

The EUR/GBP is showing solid near-term support near .8820 based on an emerging 8hr bullish Gartley pattern projected to complete near the following Fibonacci/pattern convergence:

The key will be for prices to dip to our projected entry of .8847 without first moving above point C (.9239) which negates pattern structure and invalidates this particular setup. Additionally, any gaps and/or wide-ranging candles (2-3x's average) prior to the projected entry (even if the high at point C holds) may invalidate this trade as they are signs that a continuation move may be in progress.

The initial profit target of .8976 (T1) represents 38.2% of the projected CD leg at which point stops will be moved to break even. The final target of .9069 (T2) sits below 61.8% of CD. If no warning signs are present and this trade is triggered a stop-loss will be placed at .8792--just below 61.8% of XA, and the .8800 barrier--making for a very attractive risk/reward ratio.

Potential strategy: Buy if prices dip to .8847 with stop-loss at .8792 targeting .8976 (T1, stop to break even), .9069 (T2).

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Comments (5)

sufibo

October 29, 2009 at 09:25 AM ET

Seen that trade too. It is always good to do some analysis and then find a similar trade on your site too! I'm all for taking out profits at 38.2% of the CD leg. A few minutes ago i was in a Buy on CAD/JPY, it hit my take profit but i was thinking of using a trailing stop as it seemed to be moving to 50%. Just closed it out. Trailing trades for me proves quite stressful. So i bag my profits at 38.2 and then look for other opportunities. Thanks Roger, for your analysis. Keep 'em coming.

rstojsic

November 02, 2009 at 02:43 PM ET

thanks, sufibo. you keep reading 'em, and i'll keep writing 'em. :)

MDion

October 29, 2009 at 06:44 PM ET

Hi Roger
I see this as a potential H&S and therefore would say the NECK line would be much lower than what you have stated, please clarify this
Regards
Marco

rstojsic

November 02, 2009 at 02:47 PM ET

hi mdion, can you be more specific as to the h&s you're referring to?

Lu

October 30, 2009 at 12:10 PM ET

MDion... what fundamentals did you use to project your much lower entry point?

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