Two-way play in EURGBP


Background

The long-term outlook for the cross remains to the downside but we look for a higher correction intraday. This has resulted in another two-way play this week

Monthly – Over the long term, we are looking for a move back to the reverse trend line support at 0.7975. For the last 5 months, we have seen spikes in both directions highlighting indecision.

Weekly – Highlights a possible descending triangle formation. Plenty of scope for a move in either direction. A break of last week’s low is needed for the selloff to continue.

Daily – I think most FX analysts are toting the same formation. A possible bearish Head and Shoulders. The reason I say ‘possible’ is that the base needs to break to confirm the formation.

Intraday (four-hours) – The last move lower can be seen in five waves reversing close to the 261.8% extension level of 0.8302 (from 0.8788-0.8603). This would ‘suggest’ that the last move (higher) is merely corrective. We have left a gap open at 0.8370. These windows tend to get closed. The previous area of congestion is seen at 0.8570-0.8600

Intraday (60 minutes) – We have broken the triangle formation to the upside. The measured move target is 0.8565. 261.% extension is seen at 0.8576 (from 0.8312-0.8414)Source: Saxo Bank

Management and risk description

Parameters

Intraday

Entry: buying at 0.8520.

Stop:0.8490.

Target: 0.8565.

Time horizon: today only

Medium term

Entry: Selling at 0.8565.
Stop: 0.8610.
Target: looking to close to gap (0.8370). Try to leave some on for an unexpected result in the French elections.

Time horizon: medium term

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Two-way play in EURGBP

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