Long Trade In EUR/GBP

Sterling is the Grandmaster Flash of the forex market today, but I’m looking to sell it against the Euro.

Talk that the UK’s QE programme might take a breather has been credited for the rise in Sterling this morning; 260 pips on GBPUSD and 150 pips on EURGBP as I write. This has taken the EuroSterling rate down to £0.9150, just below its 21-day moving average.

For me this market is still in an upward trend with a rising 21-day moving average. The tricky bit is that although I reckon a rising 21-day MAV will act as support, the price often drops below this level in the short term. The MACD going negative shows a muscular downward momentum and the price is a meagre 20 pips from triggering a ’sell’ signal on the Parabolic SAR.

I’ve scrolled down to the 30-minute chart for a closer look for signs that the morning’s excitement has run its course. At the moment the RSI is showing an astonishing reading of 8, and a second wave of selling obliterated the possible doji candle.

The longer trend is up, but today’s trend is emphatically down so no heroics from me just yet. I’m looking for a bullish divergence on the RSI and MACD followed by a candle reversal pattern like a hammer or an engulfing candle before putting my money to work.

Target on this one? I’ll look to lock in my customary 30 pips on T1, then run the balance looking first for a return above the S&R line at £0.9275, then a return to £0.94.

If I’m wrong and the line doesn’t hold then I see a test of support at £0.9080.

Subscribe by RSS Subscribe by Email