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EUR/GBP/USD Triad

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I like to look at FX Triads to keep my analysis honest (or at least to identify where something doesn't look right).  Not always easy to assess, especially when the two main sides to the Triad (in this case EUR/USD and GBP/USD) are going the same way.

I am looking at EUR/GBP with a contrarian bias (Warning! I have a bias here but at least I recognise it...) in that I believe the majority view that Brexit is doom for the UK to be misguided.  People will point to GBP/USD as proof but I believe this will turn out to be confirmation bias as if you also look as USD across the board you will see USD strength and others do not have Brexit issues to contend with (EUR, CAD, Yen, etc. etc).

Anyway back to the only data that matters to me, price action.

On the weekly chart I have a very strong Triangle consolidation formation since the 7 Oct 2016 market top, which I believe to be a wave B top leading to a strong Wave C Bearish move (check out a Monthly chart to see this more clearly).  The alternative assessment, aligned to the anti-Brexit viewpoint, is that the Euro will charge up against GBP and that this Triangle consolidation is building toward this move but I find it hard to see such a strong move against GBP if the Euro also drops heavily against USD.  Either way when there is a breakout of this Triangle it will be a trading opportunity, especially if it is to the Bearish side (more potential points in that scenario for me).

Looking at the Daily chart I see a Flag formation (blue lines) that has been broken and now the market is seeking to retest that Flag resistance.  It is possible that this has happened already on Friday 21 Sept (my Brown A label) but I believe we will see another rally to the Fib 76/78% area where it intersects with the lower Flag trend-line to complete an A-B-C retrace.  If we see a rebound back off this area of resistance then a Bearish move could be on.  This could coincide with a rally in both EUR and GBP vs USD (as I have indicated in other posts is my assessment) OR a full on Bearish move in both cases with EUR getting hammered faster and harder (trade wars anyone?).

Looking at the Hourly chart I see a potential A-B retrace completion with a breakout of the upper tram-line.  If you like to trade short term there could be 100-150 points on offer here.  I prefer to keep my power dry for the Short side of this market, unless the breakout from the Weekly Triangle is bullish of course but in that case I would seek better market opportunities elsewhere.

Anyone have any thoughts to offer on this market?  I'm really very keen to hear challenges especially.

 

EURGBP-1-hour_011018.png

EURGBP-Daily_011018.png

EURGBP-Weekly_011018.png

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Short term looks like it's been "flagging"  with a potential H&S reversal forming. Longer term supply & demand zones shown. The Europeans are very good at creating situations that impact the Euro -  Italy being the latest. Through in brexit and there is more uncertainty !

Capture eg m.PNG

Capture eg d.PNG

Capture eg 1h.PNG

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oops through s/b throw

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Thanks @elle  I tend not to use H&S in lower time-frames myself and even in higher time-frames only with certain conditions and so hadn't seen that but I take your point, especially if you also look at the recent up/down as a higher high (just) and higher low, so it all seems to stack as a bullish move set up (at least ST).  And with GBP and EUR turning down again, and if my assessment that EUR will not fall as far as GBP in this move, then EURGBP should rally.  I would like to see a firm jump soon to confirm.

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Ha! if ever there was a more timely object lesson in keeping an open mind than EURGBP just now I don't know of it.  Reminds me yet again not to trust H&S on low time frames.  In any case the over picture remains intact until the past lows are broken, let's see what GBPUSD does next...

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35 minutes ago, Mercury said:

Ha! if ever there was a more timely object lesson in keeping an open mind than EURGBP just now I don't know of it.  Reminds me yet again not to trust H&S on low time frames.  In any case the over picture remains intact until the past lows are broken, let's see what GBPUSD does next...

100 pips in a matter of second!

2136980753_2018-10-0115_37_26-IGTradingPlatform_SpreadBetting.png.9e47a6e969e414f2cb9f4490604ca11e.png

427241957_2018-10-0115_36_41-IGTradingPlatform_SpreadBetting.png.85241eced8f5565b31dc44fc21503a95.png1226628230_2018-10-0115_35_25-IGTradingPlatform_SpreadBetting.png.e6861b8b7021896f7727225e8270be6d.png

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Nice.  I can tell you, being Irish myself, that the hard border issue is a total non issue.  There has never been a hard border on the Island of Ireland, even during the worst of "the troubles".  How can there be when you can walk across a field from the South to the North and not even realise it?  This is an issue that has been created purely as a negotiating position in the Brexit "talks".  What both sides really need is a dose of pragmatism but these are politicians so don't bet on that any time soon.  Cue a down to the wire game of chicken with either a last minute deal pulled out of the fire (which will be curiously well prepared and ready to implement...) or a no deal exit, which will be worse for Europe and the UK both economically but especially politically (in my opinion).

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Are we seeing a EURGBP tramline breakout and retest?  If so this offers up a sharp rally opportunity and we should also be seeing a related drop in GBPUSD as this pair follows the earlier moves of EURUSD and AUDUSD, which is exactly what appears to be happening right now.

 

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If anyone is trading EUR/USD or GBP/USD it may be worth noting that EURGBP has just rallied away from a long term supporting trend-line with PMD on 4 and 1 hour charts.  I expect a period of GBP weakness for a while until the EURGBP bear resumes.

For both EURUSD and GBPUSD this just means that GBP would come down further in the short term as both are trending down at present.EURGBP-Daily_091018.thumb.png.1d8b95113a9e593d21a2cfc097bc5821.png

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BTW, I should add, whether we see a retrace on this pair or not, which is debatable, a firm break through the LT trend-line support is an interesting time for Short trading.  Watch out for a break and retest through.  Best set up is a retrace as per my blue arrows on the chart but a break-through of LT support is also a good point to consider a trade.

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A word on the EURGBP Triad with everyone focusing on stocks and USD it is easy to ignore the third leg of the Triads.  I think this one in particular has a lot of points to offer (and already has for me - warning I am Short this market so I have a bias for that to continue).

As previously posted, I am taking a contrarian stance here, in that I believe GBP will be stronger than EUR against the USD, although both will suffer.  I have a Strong Triangle formation on the Weekly chart, which has been poked through to the down side this week (not yet a confirmed break out though.

I think this is a long Wave 3 motive Bearish move and, if right, I am expecting some retesting of the Triangle bottom line, maybe in consolidation phase before a resumption of the bear move down, which would be quite fast and hard.

There is a chance of a so-called hard retest (or fake breakout) and return to Resistance around the 8850 level within the Triangle.  This would then be a point where either the Bear resumes and an eventual Triangle breakout occurs later OR the Triangle consolidation continues on up.

As I expect EUR to play catch up on GBP in the coming days the retrace fits but not sure for how long until both GBP and EUR complete there respective retraces vs USD.  For EURGBP to go full Bear either GBP must retrace further and faster than EUR and/or then EUR bear is worse than GBP.

If I am right there is 4000+ points on offer on this market.

EURGBP-Weekly_111018.thumb.png.7a10d6289a413062ed9fe70877c6dd1a.pngEURGBP-Daily_111018.thumb.png.94ab193c6728780005c13f888dcd77a1.png   

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Hourly chart breakout of a potential ending Triangle at Wave B (and double bottom).  Potential ST retest in progress.  Good PMD and LT trend-line support.

A break away rally from here suggest a decent run up in retrace (or within the Weekly Triangle consolidation).  Downside risk is curtailed by the previous low (the other part of the double bottom) as a break below suggests a major Bear market is in the offing.  More importantly for now, with both EUR and GBP falling at present, it supports a fairly decent drop in the GBPUSD pair, which fits with my road map projection for that market.  The Triad is worth watching if you are trading EURUSD and/or GBPUSD at present.

EURGBP-1-hour_061118.thumb.png.874e9c0c97b6e1e86a9e64ea06565201.png

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If my road map for GBPUSD complex retrace scenario is right and EURUSD is simultaneously set for a straight forward rally then EURGBP should go up.  My last post (above) was suggesting this exact scenario.  That one broke down but I now have another similar, but better, set up that is poking it's head above the triangle line.  I'd be looking for a firm breakout through over head ST resistance to trade this (note I am not trading this market Long, only Short LT).

EURGBP-1-hour_071118.thumb.png.3b42e30a3d9c052815b866a9a5c54844.png

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The market appears to be making another attempt to breakout of the Triangle consolidation, which I think is an ending triangle for the short term bearish move (it conforms to the classic EW a-e wave motion for such).  There was a strong bounce off the lower line in the last hour.  A breakout through the upper line and over head ST resistance would be Bullish in my view.  I am not trading this pair Long as my big picture assessment is for a significant Bearish move to come once the long term Triangle consolidation is broken.  I am however watch it to support my assessments on GBPUSD and EURUSD.  A bullish move here supports divergence between GBP and EUR directions or at least greater strength in the EUR move if both rally.

Road map assessments to watch for:

  • EURUSD rallies away (consistent with the support zone bounce)
  • EURGBP rallies away supporting the above
  • GBPUSD either puts in a short weak rally to over head resistance and then goes into a Bearish phase, possible also aligned to AUDUSD OR drops way on breakout of current potential ending Triangle set up

Clearly the key point with this pair is in which direction the Triangle gets broken in the context of the other 2 legs of the Triad.

EURGBP-1-hour_081118.thumb.png.927755a4f0885cfee992d301f801faa8.png

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Looks like this market is making an attempt to breakout into a rally.  I have a LT support trend-line, which is the lower line of a very large Triangle consolidation (if and when this is broken, well look out below...)  For now price remains contained within the Triangle and has just rallied back off the line with a pin bar action on the Weekly.  On the hourly chart we can see a break of the small ending Triangle AND the channel line (if that proves more reliable) and is now testing the immediate overhead resistance zone.  I would no tb surprised to see price drop back from here at the first time of asking and retest the breakout zone before rallying away strongly.  Such a move could coincide with a EURUSD rally or a GBPUSD fall or both, which fits my set ups on both of those markets (doesn't mean it will happen but good likelihood is higher if the Triad set ups are aligned).  That hourly move does look like much but when you look at it on the Daily it does seem like a health rally move.  Decent PMD on Daily, 4hourly and hourly charts.

I am not trading this market long, just using it to support my EUR and GBP analysis.  I m actually Short this market from the last Triangle top line bearish move and will only add to Shorts as and when.  However we could see either a retrace to about the 8800 or 8900 level OR another test of the upper Triangle line (9000 ish).  I am inclined towards the former but that is because I have a Short bias...  If I were to trade I would have gone Long on the Triangle breakout with close stops and might go Long again either on a failed retest and rally or a break of the over head resistance.  Watch EUR and GBP vs USD as this move develops for clues.

EURGBP-1-hour_101118.thumb.png.70c895f778d5099b57bed35d7fafdd0c.pngEURGBP-Daily_101118.thumb.png.be6b77530da89a0e1302f8045f1914d9.pngEURGBP-Weekly_101118.thumb.png.f612ff1c25a01196e2e5435792e096bb.png

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So this market did indeed make a break for a rally through both the Triangle and Channel set ups but has been stopped at short term resistance and is likely to make a retest of the breakout zones before a stronger rally.  With the Euro presenting weakness one cannot rule out a break through the lower long term support line (Weekly chart Triangle set up) and I am biased towards that but perhaps not just yet (time and price action will tell).

For now, on the 1 hour chart, I see a retrace and retest of support.  I also see that near term price gap has not yet been closed.  Therefore my leaning is towards another rally through the near term resistance.  If this happens then either GBP will be dropping faster than EUR or EUR & GBP will turn and rally but EUR faster and harder.  As I currently see GBP (and AUD) rallies as more likely I conclude that EUR will rally hard, but need to watch GBP and AUD for correlation turning points and also this cross pair (EURGBP) for similar correlations and of course EUR price action.

Trading strategy:

My problem with trading EURGBP Long is that it doesn't fit my long term prognosis (therefore would be counter trend trading, which is inherently more risky) and also would be trading within a consolidation zone, which is fraught with difficulty and whiplash moves as Bulls and Bears slug it out.  Therefore on EURGBP I will continue to watch for an indication that the long term Bear I am projecting is occurring to get Short and for correlation confirmation for EURUSD and GBPUSD.

EURGBP-1-hour_121118.thumb.png.a1f8401522acc922b68df550be3d07a3.pngEURGBP-Daily_121118.thumb.png.f984e4c327dc0c608ae15adcf11fc34e.png

 

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Breakout rally was curtained and the pair put in a new lower low (marginal but still lower).  Now testing the LT Triangle lower line and the Monthly chart FIb 23%.  I would not trade a Short here until I got a confirmed break on the Weekly chart.  An unclosed price gap remains above and both GBP an EUR have been rallying of later.  Remains to be seen but my set ups still show EUR as having more distance to rally.  I will continue to watch EURGBP for clues for the primary pairs and for a potential Short campaign.

EURGBP-1-hour_131118.thumb.png.c928fbfafbc6cfff87fde8f7b1632a0d.png

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