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EURGBP Daily

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Nice daily chart showing head and shoulders with price challenging neck line today, from FOREX.com

 



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Another thread gone quite this EURGBP, people not interested in anything to do with the GBP?  One thing that is anathema to traders is a lack of volatility because there is little reward on offer for the risks taken and while volatility can bring increased risk it certainly brings greater reward potential.  This is why I am focused on FX right now and in particular GBP,EUR,USD crosses.  As @Caseynotes pointed out when he posted that video on Triads, it is well worth analysing and tracking all 3 crosses of a Triad even if you only plan to trade one.  Having posted my analysis on GBPUSD and EURUSD I thought I would complete the Triad.

 

Interestingly my analysis suggests that all 3 are bearish!  How is that possible?  It is only possible if both Euro and GBP go down against the USD but the EUR goes down faster and further and that is what I am seeing, albeit that recently the GBP has led the charge down.  I do expect people to fret about the impact of possible Brexit on the EUR and strength in the USD will hit the Euro harder I think owing to the economic situation in the Eurozone and ECB willingness to continue to be accomodative.  So far BoE has halted further easing and I can't see Carney changing that any time soon.

 

Having said that the case for EURGBP is not straight forward.  Looking first at the Monthly it looks remarkably similar to EURUSD but there are clearly 2 scenarios.  1st that we are in a motive wave down with no end in sight and 2nd that this is an A-B-C retrace that has already completed.  The Weekly offers a nice pair of tramlines and a recent rebound of the upper tram at Wave 4 (purple).  This occurred at the underside of the Fib38% (monthly) and 62% Fib (daily).  Two coinciding Fibs is particularly strong resistance/support.  There is also a Neg Mom Div on the Weekly, albeit not particularly strong.

 

On the Daily the alternative EW counts are still in play so no clarity there but there is a good Neg Mom Div at Wave 4 (3rC Pink).  However there was strong momentum of the recent retrace to possible Wave 2 (Pink) followed by a strong reversal today, which is where we are at currently.  The 4hour and hourly again can support either scenario although the A-B-C to Pink Wave 2 is more obvious with Neg Mom Divs in support and RSI/Stochastic trending down.  The play here was to take a short earlier this morning and move stops to B/E quickly.  For now I would await developments and watch the EURUSD in particular for weakness then seek an entry on any retrace. 

 



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EURGBP heading down, signal for EUR weakness?  I see EUR as week vs both USD and GBP over the coming weeks but for GBP to also be weak vs USD, albeit with some short term upside.

 



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Regardless of what the USD is doing this cross is showing that the Euro is weakening, perhaps as the reality of the impact of Brexit on the EU dawns and people start to see Brexit as a realistic possibility.  Imagine what would happen when/if they start to see it as a probability?

 

The 4 hour (and hourly) charts both show a turn at the 76.4% Fib with a possible ending triangle formation.  A break below this level would be a significantly bearish move.  If you look at EUR and GBP vs USD you can see why this is happening.  GBP has fallen to fast vs EUR of late and now we can see a potential correction of that in the offing.  Similar picture on the GBP/USD/AUD triad BTW.

 



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EURGBP looks like it might be about to start a retrace.  Don't know what that might indicate for the other 2 pairs just yet but it looks like the top of any retrace could coincide with the Brexit results...  Makes trading **** difficult but if my long term projections for this pair are right, and we are only at the beginning of a bear move to the 6,800 area then a post Brexit short may be on offer.  Cheeky Long on the retrace pre Brexit results is also a potential play.

 

Anyone got a view on this one that they would care to share and, you know, discuss...

 



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Hi , picking up from your post from the other thread, I agree it could look like this pair should make a Wave 5 top now and then begin to fall but the bigger picture set up looks more like an A-B-C to Wave 4 (purple).  this A-B-C could be drawn a couple of ways (alternate in red labeling on Daily chart) and if that is correct then we should be in a small 1-5 up, with a final wave 5 leg to go after wave 4 turn is in.  This maps well to the GBPUSD and EURUSD charts also.  As such in the short term I expect GBP to be weaker than EUR while both make a weak retrace and then begin their decent but then EUR will weaken faster and this should be reflected in EURGBP drop off.  There should be several chances to get Short on this cross once we see what is happening on the other two parts of the Triad.

 



 

 

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Hi Mercury, good to hear your insight, as you say W5 has yet to be complete, which indicates that we could see in the short-term some weakening of the pound, but once complete I do think we will see some strengthening of the pound again. This is has been in a bear market (or gpb-eur strength) over the course of many years now, hence why it is always useful to look at this at a bigger picture, always difficult to see the waves clearly, hence why you do have to look through the short-times frames to decipher the waves, lol. Therefore, if proven correct with this analysis, which I am quite confident for now with the analysis, final wave 5 in terms of a weekly time frame should reach around the 2007 support 6575 area.

aud usd 2h.png

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Still waiting for EURGBP to top out at 8,400 resistance zone (note there is a scenario that maps out a Wave 4 turn in the 8,600 resistance zone but this is ragged edge stuff).

 

 

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Looking at this currency pair, I believe it would be fair to say, to exercise some caution anybody who is considering entering a long position here. MACD AND RSI showing a change in the wind at present and also approaching a major resistance zone around 8800 level. Of course of the medium term, this pair along with most GBP pairs still have a lot of bear power control, however looking at the technicals it does appear a retracement is on the horizon.

aud usd 2h.pngAUD USD DAILY.png

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Agreed  You would have to wait for a dip to go long again but then you would have to be sure the prevailing direction is up.  I'm not yet convinced, although the case for continuing the downward trend of the past few years is growing weaker with this strong rally.  I do at a minimum expect a retrace after such a strong rally and Negative Momentum divergence on 4 hourly and hourly is getting very strong indeed, not on Daily interestingly, which given pause for thought on the long term.

 

For now I am seeking an entry Short, I think the key to this is to watch GBPUSD for a relief rally, it looks interesting from that point of view just now...  Let's see.

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Glad you share my thoughts Mercury, because of the nature of the Brexit Fears, which do seem a little exaggerated, one has to some times be over cautious. As you say, key will be a relief rally in cable with an opportunity to short EUR-GBP.

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 Is EURGBP about to turn?  Having made a short run down we now have a retrace at resistance with Stochastic in over bought area with possible turn up in GBPUSD.  Worth a Short with close stop just above the recent high, which has a clear Neg Mom Div.

 



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 There is a scenario that shows another leg up to the 8700 area to complete this large scale move so keep stops tight and don't over load this trade until the turn is confirmed is my take.  If this turn fails then the next one is is very likely to work.

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So it looks at face value that this pair is at a turning point but the key question is whether this is THE turn into a long rally down or just a brief retrace before another rally leg to about 8,800.  There is strong Neg Mom div on 4 hour and hourly charts but not on the Daily, which gives reason to consider that another leg up is a distinct possibility.

 

My approach is to hold my Shorts at B/E against a possible further rally and seek another entry further up if that happens.  The only thing to watch out for is a EWT 1-2 retrace back up before a major drop that may take out stops and leave you high and dry.

 



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Looks like my preferred scenario of another leg up to the 8800 area is on the cards.  Given the Euro is the larger currency, in terms of weighting, this most likely would coincide with a rally in EURUSD, which is what I am seeing in my analysis on that cross.  Cable could yet go either way while EURGBP goes up.

 

Looks to me like an A-B-C retrace has concluded, I went Long at the support zone coincidental with the Brexit top so let's see.

 

I anticipate a 1-5 wave profile rally up to the vicinity of 8800 resistance zone before a much bigger drop, whether motive or retrace I can't say just yet.  While there is strong Neg Mom Div on the 4 hourly there isn't yet on the Daily so I'd like to see one emerge on the daily coincidental with the 8800 resistance zone and other indicators showing a turn back down before chasing my Long and reversing.

 

 

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Does appear that we could be completing W5 on a 4 hourly chart, therefore leads me to conclude that we could see this go higher still.

gbp 4 hourly.png

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Interesting this one  and until today's spike down I was tracking for a new higher high to complete the move up but now I am not so sure.  From a technicals POV if your 1-5 down is correct then we would be looking for an A-B-C retrace and a turn at a lower high in Wave 1-2 form as a prelude to a strong drop in wave 3.  However if you ignore the long tail from BoE release then we have the original A-B-C down that I was tracking and should get the higher high you are suggesting.  Given the uncertainty around the direction of Cable and EURUSD (why doesn't that cross have a name?) just now it is hard to consider trading EURGBP until one of the mentioned scenarios presents itself.  In either case the trade would be a Short, it now just remains to be seen where it turns and then to find a way in when it does.

 

As an aside, I currently believe that both the Euro and GBP will continue to rally for a bit to make credible wave 2 retraces before hammering down in a wave 3 of 3.  These are much bigger trade potentials that EURGBP I feel.

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Hi 

What do you make of today's movements so far? Looks like it is trying to rally as per your forecast, but finding strong resistance at these levels? Interesting to see if it does try and break through resistance levels before a potential retrace.

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Price got close to my by price at 5am this morning but didn't quite make it and that BoE spike down is a problem (do you count it or discount it?).  The move up is suggestive of a change in trend, we should see a small retrace and then rally again to confirm this.  At this stage I prefer to wait and see how the rally evolves and seek a Short opportunity a bit later rather than take a Long but any Longs should have close stops to guard against the risk that the move down is not quite done yet.

 

 

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It does appear that we still have not completed this retracement yet and therefore I still conclude that we could still see this rally higher, which could be an opportunity for the short-term.

gbp 4 hourly.png

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That's a bit too strong a retrace for my taste  and would indicate a turn and reversal is more likely (not 100% of course).  I rather prefer to see this current turn back down as the final move down, maybe to a double bottom type ending, with Pos Mom Div and then a proper rally may ensue.  As I write, GBPUSD is catching a bid, let's see... 

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It appears that their is still mix signals as to whether the BOE will cut interest rates in August. I myself am sceptical to this approach, largely due to looking at the present effect of what cutting interest rates have done to other major economies. Not to mention how this could further impact on banking profits. However in terms of the technicals I still maintain that this currency has yet to complete its wave cycle to the upside towards the 8800 mark, but most likely around the 8700 mark, as outlined in the weekly chart.

GBP (DFB).pnggbp 4 hourly.png

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,

 

Are you still thinking 8800?  Market is at a fib 76% with Neg Mom Div on hourly and just bounced back down.  It is not conclusive yet but this is after a possible ending triangle formation and a complex A-B-C retrace.

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gbp 4 hourly.pngHy Mercury, as you can see its been 2 weeks since I last posted something on this pair. Right now, on the daily I am seeing some noticiable divergence on the RSI and MACD.  Which therefore suggests that we should be seeing a final wave up for now, before a significant sell-off of the EUR against sterling. The 8800 level I think could be reduced to the 8700 level, especially if we are looking at a W5 flat lining or double top as they say, before we see the start of a significant retracement. At present I am still debating as to whether we have complete w4 or still in that process, therefore I wish to wait for this to develop further for now. But the selling of the pound at present does seem to have slowed in terms of its sharpness for now.

gbp 4 hourly.png

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Yeah I have the same but there is another way to look at the big time frame retrace (3-4 Purple) and that is as a series of A-B-Cs, which would have culminated on 7 July.  You have to look at the 4 hour or hourly to see the final 1-5 wave up but it is there.  Currently we are seeing a possible turn just above the 76.4% Fib.  If this is confirmed then the current rally is a smaller scale 1-2 and the next phase will be a strong move down.  Elsewhere a drop in DX and corresponding rally in GBP and EUR may support this bearish set up on EURGBP as GBP is likely to bounce more strongly.

 



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Wasn't a double top on the hourly bu looks like one on the Daily could work.  2 clear scenarios:

  1. Double top holds and forms an EWT 1-2 retrace resulting in a strong move down from here
  2. market breaks through to a higher high

Very strong Neg Mom Div supports a double top as decent bet with close stops available at past high.  A break of the Triangle on the hourly chart is a decent entry point.  A fall off in USD resulting in a rally for both EUR and GBP could set this up nicely.

 



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I don't think we should get too excited with this € £ as I see this whole move as corrective zigzag at therefore I would urge therefore some caution and possibly wait for a better entry, of course I would welcome alternative views.

gbp 4 hourly.png

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Yes I agree  but we need to keep an eye on EURUSD.  There is also a possibility that we have seen the top on both of these but a rally that fails to make a new high would confirm that.

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