EUR/GBP/USD Triad

[Mercury 453]

My road map on EURGBP has worked out exceptionally well, and I made some good gains on this one, but I have been expecting a strong retrace and retest of the Weekly chart Triangle breakout zone for some time and looks like this pair have started this retrace journey.  The EWT count to a wave 1 (green) is sound and there was strong PMD and positive divergence on RSI also.  Now a possible A-B has been posted with a higher low so a further rally is indicated.  If GBPUSD falls, as I have suggested in a separate post then EURUSD must rally (or fall more weakly).

 

[Mercury 453]

Comparing the primary USD crosses to this Triad cross is always important for me to check my analytic conclusions from the main USD pairs.  My conclusions are that EURUSD is set to rally while GBPUSD will fall a little further before rallying.  So I would expect to see evidence of EURGBP bullishness and this is what I do see, which has not changed since my last post.  A retest of the Weekly chart Triangle lower line is my lead scenario, with the breakout zone a possibility as well.  A short campaign off this potential turn could be very lucrative, although it depends on how other markets are shaping up around the same time of course.  The key points of this analysis for me are as follows:

1. It supports my short/medium term view that EURUSD can rally despite GBPUSD falling, although I expect GBP to follow suit eventually.
2. It supports my view that EURUSD will be a big looser and ripe for a major Short campaign  

[Mercury 453]

FX seems to be all about USD strength, although I remain on the sidelines to see whether this materialises soon or requires a large retrace to "prime the pump".  One thing that is certain is that EUR has been stronger than GBP, which is exactly according to my road map for this pair (see previous post).  The retrace is in complex form, lots of whipsaw, but now has raced into the wave C and has shot straight up towards the 2 resistance zones I had previously identified.  At present I am still tipping a retrace of the long term Triangle consolidation lower line but first we will see how a retest of the breakout zone.  Long term I am tracking GBP strength vs the Euro with massive structural issues within the Eurozone (fiscal and political) as fundamentals backdrop.

 

 

[Mercury 453]

Looks like this pair may just have ended a retrace move.  It has been a sharp rally in favour of the Euro but at a minimum a short term bearish move is indicated, which could turn into that rout of the Euro I have been tracking.  This is a contrarian position of course because naturally everyone thinks Brexit is inherently bad for the UK and therefore bad for GBP.  I think neither and my technical analysis says so too, at least in terms of GBP, whatever about the other.

The technicals on EURGBP show the following for me:

• Price has hit the Fib 62% and bounced back down
• Strong NMD at this turn point
• Decent 1-5 EWT count on the wave C
• Current breakout of the Daily chart trend line to the bearish side (not yet closed below)
• On the 1 hour there is also NMD and a small scale 1-2 retrace prior to the channel line breakout (unconfirmed)

My analysis on the other 2 legs of the Triad suggest a strong rally for GBP followed by a stronger bearish move on EUR so this EURGBP move is consistent, which is why I track the Triad.  The one watch out is a possible final leg up to test the Weekly chart channel that was broken back in early 2019.

 

[Mercury 453]

One hour chart is shaping up to back up the Bearish move I noted in previous posts.  Nice mini rally off the ST support & failed retest of the recent breakout zone.  Current move down is strong but there are several ST support zones to punch through before this thing really gets going.  I would be expecting a 1-5 form Bearish move followed by a significant retrace on the Daily chart before the meat of any long term Bear takes hold.  In my Triad assessment this would coincide with major Bearish phases for EURUSD and GBPUSD, just far worse for EUR.  I have posted on my Fundamentals assessment supporting these scenarios previously in other posts but it can be summarised as follows:

• Big market meltdown - USD rally in flight to safety
• GBP balance of payments is bad, the UK needs a reset.  This will come from Brexit freedoms and a lower pound driving exports but will take a few years, hence GBP down while USD rallies
• EURO is a basket case, essentially a basket currency with too wide a range of underlying parts (Greece to Germany and everything in between).  The middle of the road economies such as Spain and Italy are heading south.  There is no unifying central bank with a clear mandate and no government that can impact economic policy across the geography.  Countries like Greece need to devalue  to reset.  There are too many subsidies and too much bureaucracy, fueling crazy situations like Greek government workers retiring on full pensions in their early 50s.  Totally unsustainable $%!&fest.  Cue meltdown triggered by Brexit perhaps or more likely more chaos on Greece.

 

[Mercury 453]

Another leg up then and two 1 hour chart retests of my Weekly Triangle resistance line (see weekly chart).  On the 1 hour chart I have a valid EWT count up to the second retest, which is being sharply rejected in this hour.  A ST lower low would be nice and a break of the Daily channel line conclusive.  There is good NMD on both the hourly and daily with Stochastic and RSI both over bought and breaking below.

Are we about to see that EURGBP swing I have been tracking?

[Mercury 453]

Nice move down through the 1 hour potential ending diagonal (or channel) followed by a couple of failed retests, the second one being right on the Fib 50%, before this pair fell away to now test the Daily chart larger channel support.

A break here, after a small scale 1-2 retrace should bring up a move down to the next support level.  Medium term I expect another reasonably significant retrace before the Bear really gets going.  A rejection on the channel line will suggest another retest of resistance (or maybe another leg up) but those are scenarios 2&3 respectively for me at this point.  Let the market decide...

[Mercury 453]

EURGBP has been stuck in a consolidation zone since it apparently topped out early last week.  Obviously such a zone can break either way another small leg up for a retest of the weekly line cannot be ruled out.  However this pair does look to have broken the Daily channel line support (see hourly chart for more details).

My case for the Bearish turn is outlined in previous posts above.  Since my last post the Hourly price action has seen this par caught between a short term narrow band support/resistance with 3 failed tests of the final ending channel breakout zone (circa 8920).  This occurred along the daily channel line but the most recent price action shows a break and failed retest of this line and then a small 1-2 currently in play.  I will be looking for a break below 8870 support zone to gain confidence in a Bearish move for this pair but it is worth noting that the stop placement just above the recent highs provided for low exposure and he margin requirements is low relative to USD pairs.  If my long term prognosis is right and this pair now moves into a fairly swift move down any Shorts at current levels become self funding.  I would be expecting a fast drop in 1-5 form followed by a larger scale A-B-C retrace that then sets up a long term Bear market. 

 

[Mercury 453]

EURGBP looks to have completed a top out of the retrace rally, right on the 76/78% resistance zone and Daily channel resistance line and Weekly Triangle resistance line failed retest plus NMD with a credible A-B-C wave 2 retrace form.

On the hourly chart price has broken the daily channel line with a 1-5 wave 1 down and got stopped at the first short term support.  I might expect a small retrace and retest of the channel line to set up a stronger move down.  This is contrary to received wisdom that Brexit will mean GBP is weaker than EUR but received wisdom is often wrong and contrary positions are the best winners.  I would certainly want to see a retrace of some sort to pile in and also a conclusion of similar retraces (Bearish) on GBPUSD and EURUSD to set up fast rallies.

 

[Mercury 453]

EURUSD and GBPUSD may or may not yet be into a short retrace but EURGBP has retraced and hit the daily chart channel line with a failed test and rebound back down, as suggested in my previous post.  This has, however, happened much faster and more sharply than I might have imagined and the price action gives me concern that another retest could be on the cards before the Bear gets going.  Having said that a failed test on the Fib 50% is compelling.  2 scenarios then:

1. another leg up to complete an A-B-C retrace with a failed retest of the channel line, maybe coincident with a retest of the Weekly Triangle line and the Fib 62%, seems compelling
2. a drop through short term support to begin the Bear.

[Mercury 453]

Apologies I have a correction to my charts.  I had the Daily Channel lower line in the wrong place as a result of some scenario working.  This is now corrected, please see both the Daily and hourly charts below.  A retest of the daily channel (or Triangle) would more correctly coincide with the Fib 76/78% rather than the 62%.

[Mercury 453]

So looks like a turn just past the Fib 62% (half way between that and the Fib 76/78%) and right on the weekly Triangle line.  Price ideally needs to stay below this line at the end of the week, although the lines are not that accurate so this is +/- of course.  Price action looks good for a turn through with a small 1-2 retrace in play.  A break below the recent low will be very compelling and if the turn is in then the following days and weeks should be very Bearish as this would be a wave 3.  Looks like turns on EUR and GBP (and AUD) are also confirmed, with EUR in particular breaking above previous highs and associated resistance.  May still get some retrace action on these USD pairs to retest near term support but for now all looks good for both a USD Bear and EURGBP Bear.  Another leg up to the Fib 76/78% is still possible so care is needed but I would say the odds favour a drop.

 

[Mercury 453]

EURGBP is poised for a drop through short term support on the back of this mornings GBP push while EUR ditters.  The Daily chart Triangle line has been broken and failed a retest twice, the last one at Fib 76/78% retrace.  The drop is strong but will not be confirmed until the short term support is broken.  After that we look set for a sustained Bearish move, contrary to the Brexit doom mongers thinking.  I do expect EUR to rally as well but not as hard as GBP and it may even go short term Bearish while GBP rallies today.

[Mercury 453]

My set up for an EURGBP breakout to the downside proved to be a bit premature as he pair made another test of the Fib 78% resistance zone but this does not negate the overall scenario, in fact if anything it is a firmer turning point and the price action today, on GBP strength as opposed to EUR weakness, is encouraging for EURGBP Bears.  The repositioned Daily chart Triangle line is coming up, as is the Weekly Triangle line.  Critically the latter really needs to be closed below today, which, if that occurred, would also be a Daily triangle breakout.

A few hours to go yet but worth tracking I feel.

[Mercury 453]

EURGBP is taking its time to resolve, just as the retrace on the primary pairs are taking their time (not sure if we are there yet on either of those, looks like another level down is on the cards).  However EURGBP is at an interesting juncture.  IF my lower Daily chart line is right (and it might not be as there is an alternative scenario that sees another retest of the upper Triangle line of the Weekly chart, but more on that later if needs be) then this line has been broken and held firm on 2 retests.  Currently price has dropped away from the line in what may be a 1-2 turn.  Shorts here would need stops just above the 2 (green) high, which amounts to very low exposure in my book.  The NMD on the Daily has be joined by 2 NMDs on the hourly charts at 2(green) and 2(brown).

Scenarios:

1. The market falls away from here as GBP turns ahead of EUR and rallies hard in wave 3
2. The market reverses through the Daily line and takes out the 2 (green) high, resulting in a likely retest of the upper Weekly Triangle.

Any Shorts should have close stops to guard against #2 but exposure is minimal.  Chances are fair for a Bear move, although one could point to the strength of the rally so far and reluctance to let go, however the swing traders mantra is buy weakness and sell strength so...

[Mercury 453]

EURGBP cross is at an interesting juncture.  The big picture assessment is unchanged but now the 4H and 1H charts are showing a potential bearish turn in action.  A break below near term support is indicative and a break below the lower key support would be confirmatory for me.  The best scenario to support this is for a smaller drop on GBP to maybe that double bottom I mentioned in my GBP thread, while EUR continues down to find its key support.  I would then expect a stronger rally on GBP as my analysis on the respective pairs indicates.

[Mercury 453]

As mentioned in my GBPUSD thread, this cross looks like it may finally offer up that Short I have been tracking.  There is still a chance of a retest on the upper weekly chart Triangle line but that aside we look to have an ending channel breakout to the downside after a spike above the lower weekly Triangle line.  The fact that the lower and upper lines of the weekly Triangle are now so close (near the apex) means the set up is more questionable and an alternative placement further below is credible.  There is good NMD across the board and I will be looking for a small scale 1-2 retrace (just before or just after the daily chart channel line) followed by a strong move down to confirm.

A breakout of the lower Daily chart channel would be necessary confirmation so until then I will keep stops just above the recent highs but look to pyramid once the break low is confirmed.

[Mercury 453]

EURGBP has poked down through that daily chart channel line.  This is not yet conclusive of course, the day isn't over yet and this pair can be a bit whip lash.  Nevertheless it is an encouraging sign that GBP may well be stronger the EUR, at least for a while and contrary to the conventional "Brexit Bad!" MSM push, the latest coming from none other than Richard Branson (like he knows anything about FX!) and a few days before that the BBC opining that the "Pound heads for two-year low as holidays begin" due of course to Brexit (not at all political those 2 articles then..!)

Branson:    https://www.bbc.co.uk/news/business-48942631

BBC: https://www.bbc.co.uk/news/business-48926232

Still I love this stuff as it often marks a turn the other way (contrarian dream).  Will it?  Technicals suggest yes.  Let's see.

PS: Branson is right if he means that GBP will go down vs USD but probably not vs EUR, more for Eurozone issues than UK issues but both are heading down vs USD regardless of Brexit, and have been for years prior to Brexit.  It is all another classic case of Post Hoc, Ergo Propter Hoc (and confirmation Bias).

[Mercury 453]

Classic quick break and failed retest on the Daily channel line.  A long way to go yet and can't rule out another later retest just yet but the signs are set fair for that GBP strength I have been tracking.

Thanks Richard and the BBC 😉

[Mercury 453]

This pair has held below the Weekly Triangle line (Purple) and so far respected the potential ending Triangle (Pink).  Now a break and failed retest of the Daily channel line (Blue) brings up a lower low.  Might get a small retrace as GBP plays catch up with EUR on their respective retrace moves but overall look set fair for a sustained period of bearishness.  I would ideally like to see GBP turn shorter than EUR and rally away faster to gain confidence in this pair remaining bearish but the technicals are looking favorable just now.

[Mercury 453]

GBP is proving a bit stronger than EUR and at an important juncture.  That small retrace I though might happen at the end of Friday did do now it remains to be seen as to whether this pair hammers down or hangs around for a bit longer.  It does seem like a breakout to the the down side is on through.

[Mercury 453]

EURGBP made a large run up off GBP weakness this yesterday and this morning.  Now price has hit that long term resistance trend line.  The last 3 times price was firmly rejected back from this line with daily and weekly pin bars.  The obvious question is whether this time there will be a breakout to the upside or is this another turn in a very long Triangle consolidation?

[Mercury 453]

Looks like the Weekly down sloping resistance trend line is holding again, will need to see a close below on the week to confirm but signals are strong for a Bear move.  Interesting this comes on the very day the BBC published yet another gloomy EURGBP article for the holiday maker, hot on the heels of another article calling for GBPUSD parity.  Screaming neon light flashing contrarian indicator!

https://www.bbc.co.uk/news/business-49015116

As it happens I do believe we will see GBPUSD parity, just not yet but I think GBP will do fine against EUR (which has way bigger structural problems) belying the Brexit bad mongers.

On the Technicals front we have seen a topping out at the weekly Triangle upper line.  The overall Triangle is slightly different and more normal in structure (in terms of the lower line) and medium term, if this turn holds, I would anticipate a move back down to test the lower line.  After that we will see...

Shorter term, we had a mini H&S formation on the 1H, not usually significant (I only really look at Daily and Weekly for these formations) but at a major turning point it is indicative.  We have NMD at the top and a clean 1-5 up to this point with a small pennant at about half way in the whole rally so all fitting a turn nicely.  Need to see a break through the daily chart channel lower line (blue), maybe we will get a bit of consolidation around here (possible break and failed retest) but if this is a wave 3 down I wouldn't expect it to hang about.

This all bodes well for my GBP rallies stronger than EUR projection, which got a boost just now from some positive retail data releases on the UK front.

 

[Mercury 453]

Break of the daily chart lower channel line on the 1H chart and currently retesting.  If the move I have outlined is to materialise then I would expect a drop from this retest  to complete a close below the daily line.  If this does occur I would expect this to be off further EURUSD and GBPUSD rallies with GBP being stronger in the rally.

[Mercury 453]

EURUSD has gone into reverse big time late last night and this morning, not sure how that will resolve itself yet but other pairs are holding steady so at present I would expect this to reverse again and rally hard but I am holding my positions stop protected at BE and waiting on the sidelines for a directional resolution.  As a longer term trader I don't always have to be taking a trade, in fact that is a sure sign of over trading addiction to me.

Still while all that (plus stock indices and Gold/Silver) sort themselves out I do have one market in active mode and that is EURGBP.

Right now this pair, having turned at key resistance a couple of days ago and broken through the daily chart channel line (dark blue), has now retested this line twice and twice failed.  In the last few hours the second failure has been followed up with a strong bearish bounce away from that resistance zone and the whole move looks like it is conforming to a 1-2 retrace move (note you can place the 1-2 - light blue - in several places).  The retrace (1-2 brown) was shallow, which indicates the bearish move is strong, or does it?

The moment of truth is approaching as price drops into a significant near term support one and there is an alternative EWT labeling (see second chart for alternate version), which is that a larger 1-2 retrace has yet to happen and when it does a deeper (more normal perhaps) retrace would ensue (maybe like 50%) for another retest of the resistance zone around the daily channel breakout point.

In fact it is this alternative version that I am setting as my my most likely scenario and this would happen either if GBP eventually follows EUR down OR EUR reverses and rallies sharply.  I am setting the latter as my most likely scenario on that front but either will work for me here.  As I am Short from higher up I am ambivalent as to which scenario plays out but I will be interested to assess where this might go and to add to my Short positions.

[Mercury 453]

The market did indeed show the retrace I was looking for and retested the daily channel breakout resistance zone twice more after the wave 1 (brown)  turned back up.  NMD accompanied the turn back down at the wave 2 (brown) conclusion and has since made its way down to key short term support.  A break here brings up the next short term support but after that the Bear would be on, at least until another test of the weekly chart lower Triangle line.  The retrace was complex, with a lot of A-B-C whipsaw action but if we do emerge through support into a wave 3 it should move quite fast

I am heavily short this market and expecting a rally in GBPUSD to accompany the move.

[Mercury 453]

Looks like we got that ST support break, without any retrace action of note, which is encouraging.  I would ideally want to see GBPUSD rally away and probably EURUSD as well, just not as strong, to be confident in this set up but so far so good.

[Mercury 453]

So far it looks like my weekly chart Triangle consolidation zone has been broken to the upside, contrary to my contrarian bias.  However the Week isn't over yet and I have another set up that plays to a potential GBPUSD turn (see my GBPUSD and EURUSD threads).  It all hinges on USD weakness with GBP rebounding more strongly than EUR, although long term I am more bearish EUR than GBP but we need to get past nonsense issues like Brexit first and get a relief rally out of the way so the Bear (Bull on USD) can resume.  Of course this may occur now with breakouts of key support resistance either, notwithstanding the chance of a small leg up on USD before a bearish move (see my USD thread for that scenario).

Looking at the third leg of the Triad then I have a parallel line channel up with a clear touch and rebound back off today.  There is NMD at this potential turn on the Daily and 1H charts (not shown) and similarly to GBPUSD, on the Weekly chart price ha spiked out of the Bollinger band but again in the past, when this has happened it has closed back within.  If GBP does then my bet is so will EURGBP.  On the daily chart there is a good A-B-C to wave 2 (blue and a 1-5 on a very long wave C.  It is all about GBP really.

 

[Mercury 453]

With the USD possibly turning bearish off a strong resistance trend line that could mean rallies in EUR and GBP and likely GBP would be stronger, given the negativity this currency has endured for no material economic reasons (pure sentiment driven).  I had signaled a potential daily chart channel in play on EURGBP, which was hit exactly with a concurrence of the Fib 78% off the Oct 2016 highs and price then rebounded back down on NMD.  There is also a clean 1-5 up to the potential wave 2/C (Blue) end with a small 1-2 retrace (1H chart) to allow a good low exposure entry Short.  Good NMD on the 1H chart too and recent price action suggests a ST flag formation that, if broken to the downside, should bring up a wave 1 (brown).  After that, assuming the price action still fits a wave 1, we should see a retrace to wave 2 (brown) followed by a more concerted bearish move that should break the lower daily channel line if a Bear market is on.  All of this would be more probable if EUR and GBP were in rally mode.  So overall the technicals (and fundamentals - See my "what is the USD doing?" thread) are still supporting a USD bearish retrace medium term unless or until there is a strong USD breakout to the upside soon.

[Mercury 453]

While stocks were going near vertically down and EUR was rallying GBP remained curiously docile, stuck in a consolidation zone, very much in the doldrums.  That wont last of course and when it breaks out it could be fast and furious.  IF EURUSD retraces and breaks to the upside then I expect GBP will follow suit but faster.  With EUR now falling and GBP standing still and if this continues then EURGBP will fall.  If EUR then reverses but GBP breaks out faster then EURGBP will accelerate its fall.  This is consistent with my contrarian argument that the MSM has been overstuffed with doom mongering on GBP over the Brexit debacle with many notables offering their opinions (unbiased of course - yeaaah!) and plucking at the heart strings of the people via the mechanism of holiday exchange rates (shameful!).

On the technicals front, it looks like EURGBP has hit the top of the daily chart channel and rebounded back down on strong 1H and 4H NMD.  A small 1-2 relief rally may have just ended and now that drop could begin.  The run up on the Daily looks like and A-B-C with a very strong wave C in perfect 1-5 form.