EURGBP Short
Updated
There’s been some decent swings in price lately. I believe the reason we witnessed such a dramatic rise and fall in price over the past two weeks was not so much due to euro strengthening over the pound, but because the pound weakened against the dollar more so than the euro. By this I mean that the pace of capital flight from pounds to dollars was more substantial than from euros to dollars. Due to uncertainties around US inflation data and interest rates It was only a matter of time before the latter caught up to the former which happened yesterday.
Obviously a lower inflation figure for the pound adds extra selling pressure for the UK but I believe that the EU and UK are largely in a similar situation. Granted the ECB is firm on its next rate rise but I’m comfortable with the risks from here on. Let’s not forget that the UK is still in double digit inflation so a minor tick down is not overly surprising to me.
Major central banks will have you believe that inflation is done, job finished. But I don’t buy it, not even close! But I guess we’ll see just how sticky our inflation problems are over the coming months.
As you can see from the chart, the price is currently moving within a large ascending triangle (WHITE) with moderate divergence between the price relative to the indicators which suggests weakness when compared to the volume, which is actually quite low I may add.
The price had a rejection of the ascending triangle support due to a cooler than expected inflation print. For this reason I believe that if the price can clear the 0.89 area, it will likely rise to the upper limits of the triangle (white) and rising channel (blue), with my POI being around the 0.8970-0.9050 are shown by the white circle. At which point I will be looking to sell this pair in anticipation of a move to the downside and continuing lower to 0.87’s.
If the the price struggles to clear the 0.89 area then I will wait for a lower price sell confirmation. If the fundamentals have a shock surprise in store then I will reassess the situation and position myself accordingly.
That being said, I believe this pair is still open to significant moves following US fundamentals as the US economy seems to still be running hot as can be seen from last months jobs report and today’s retail sales. Both coming in significantly higher than expected which will force Powells hand to turn up the dial on interest rates in a bid to calm inflation. As such, US data must be factored-in when deciding to trade this pair as recently, it is each currencies respective weakness to the dollar and not each other that seems to be the underlying theme.
POI - sell around 0.900 area
TP1 - 0.8770
TP2 - 0.8750
TP3 - 0.8720
If the price struggles to clear 0.89 (stranger things have happened) then i will likely wait for a clean break of the ascending triangle (white) before deciding to sell the pair.
I asses my SL based on risk factors. It is not a mechanical percentage calculation. As always this is just a basic overview of my opinion and is not a detailed analysis so please do your own analysis and always trade with caution.
Obviously a lower inflation figure for the pound adds extra selling pressure for the UK but I believe that the EU and UK are largely in a similar situation. Granted the ECB is firm on its next rate rise but I’m comfortable with the risks from here on. Let’s not forget that the UK is still in double digit inflation so a minor tick down is not overly surprising to me.
Major central banks will have you believe that inflation is done, job finished. But I don’t buy it, not even close! But I guess we’ll see just how sticky our inflation problems are over the coming months.
As you can see from the chart, the price is currently moving within a large ascending triangle (WHITE) with moderate divergence between the price relative to the indicators which suggests weakness when compared to the volume, which is actually quite low I may add.
The price had a rejection of the ascending triangle support due to a cooler than expected inflation print. For this reason I believe that if the price can clear the 0.89 area, it will likely rise to the upper limits of the triangle (white) and rising channel (blue), with my POI being around the 0.8970-0.9050 are shown by the white circle. At which point I will be looking to sell this pair in anticipation of a move to the downside and continuing lower to 0.87’s.
If the the price struggles to clear the 0.89 area then I will wait for a lower price sell confirmation. If the fundamentals have a shock surprise in store then I will reassess the situation and position myself accordingly.
That being said, I believe this pair is still open to significant moves following US fundamentals as the US economy seems to still be running hot as can be seen from last months jobs report and today’s retail sales. Both coming in significantly higher than expected which will force Powells hand to turn up the dial on interest rates in a bid to calm inflation. As such, US data must be factored-in when deciding to trade this pair as recently, it is each currencies respective weakness to the dollar and not each other that seems to be the underlying theme.
POI - sell around 0.900 area
TP1 - 0.8770
TP2 - 0.8750
TP3 - 0.8720
If the price struggles to clear 0.89 (stranger things have happened) then i will likely wait for a clean break of the ascending triangle (white) before deciding to sell the pair.
I asses my SL based on risk factors. It is not a mechanical percentage calculation. As always this is just a basic overview of my opinion and is not a detailed analysis so please do your own analysis and always trade with caution.
Note
Possible ascending head and shoulder pattern forming on the 4 hour. Started on Friday 20th Jan. Tomorrows news should make this interesting. Nearly everyone on TradingView has a bullish bias on this pair, is this justification for shorting?Note
Note
Note
I will provide details of all my positions for this current move at a later point in time. I have manually closed three trades at 0.88084 (previous resistance) but left two trades open.I initially put them on a trailing stop but removed the trailing stop and placed a TP at 0.8774 on one with a view to putting a trailing stop below 0.8785 on the last trade . I did this because I suspect that there is still weakness to be revealed in this pair before the price consolidates somewhere in the 0.87's.
The updated chart highlights one such weakness. It shows hidden divergence between the price and the delta calculation (RED). At the same time that the price has a small pullback, the delta makes a significant higher high. This suggests that there is significant absorption around this area which often happens before the price makes a further push in the direction of the local trend (down). If the price pushes lower then I would expect to see the delta indicator make a higher low whilst the price makes a lower low (I stay away from predicting specific zones so the GREEN arrows are to demonstrate my point only).
Depending on fundamentals (and if this price materialises) i will use this lower low in price action to enter a long position in anticipation for an increase in price. I will update regarding position P\L when all trades are closed.
Note
Position update -As I explained earlier, I had 5 trades running on this move. When I decided to take these trades I thought it best to again scale in my positions as the price moved higher. I do this because it generally works well for me as its all but impossible to time the peaks and troughs perfectly. Obviously the more trades running, the more risk undertaken but I would rather take on 5 smaller trades than 1 large trade. I've been doing this since 2007 and so that's just my personal preference.
My trade entries - 1)0.8873, 2)0.8889, 3)0.8902 4)0.8919 and 5)0.88773.
As the dynamic of the market changed, I closed trades 1-3 manually at previous resistance (0.88082)
1- 65 pips
2- 80 pips
3- 94 pips
trade 4 tp is set at 0.8774 and trade 5 is open with no to with a view to placing a trailing stop if we have a break of 0.8780 zone.
Total pips closed on this move - 239
I thought we may have seen a decent run through support at 0.88 today, maybe tomorrow but perhaps I've got it wrong. I guess we'll see. If the market consolidates below 0.88 area over the coming days I will let the trades run, if not I will close them out manually.
Either way i'll update again when they're closed.
Note
Position update -I've decided to exit this move as I don't much want to gamble when inflation figures are out tomorrow and Thursday. I know Germany is revised down to 9 and the EU is revised lower from to 8.2 but I'd rather be safe than sorry. As I keep saying, I don't think we've seen the last of inflation so I'd rather trade when I know the facts.
So...
TP 4 was hit at 0.8774 - 145 pips
Trade 5 was closed manually because it was my target area and inflation numbers are due. Closed at 0.8756 - 117 pips
Total on this trade - 501 pips
Note
I know I said I was looking to long this pair around mid 0.87's but I missed it :\ I guess there is reassurance in knowing at least my methodology was correct.
Hope you guys took the trade. I'm now (finally) shutting down this idea!
Trade safe
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