Many trading opportunities are momentum plays. Today’s pick is a little different as the technical chart set-ups for GBP/USD and EUR/GBP illustrate differing outcomes for GBP. As a result, we will set up orders for each of these markets essentially hedging our trade for Sterling.
Short GBP/USD
We previously wrote how the 1.34 price level on Cable is an important level of resistance. It is possible that GBP/USD pivots and moves lower in a third wave in Elliott Wave terms.
Idealized GBP/USD Elliott Wave Count
-Short GBP/USD at market near 1.3281
-Stop Loss near 1.3383
-First Target near 1.2753
-Secondary Target towards 1.2360 and possibly lower levels
Risk to reward ratio on the first target is 1 to 5.
Why is a positive risk to reward ratio of 1 to 5 important, read about it in our Traits of Successful Traders research.
GBP/USD Elliott Wave Count Nov 28 2017
Short EUR/GBP
EUR/GBP appears to be grinding sideways in a triangle. This triangle is appearing at the (b) wave of an a-b-c bearish zigzag. Therefore, we have an opportunity to short on the completion of the triangle with a positive risk to reward ratio.
Idealized EUR/GBP Elliott Wave Count
It appears we are nearing the end of the triangle, as the proposed (d) leg is .618 times the length of the (b) leg. In triangles, it is common for alternating waves to have a Fibonacci proportion in length to one another. If this triangle pattern holds, then the .9014 (c) wave high should hold as well.
-Short EUR/GBP at market near .8955
-Stop Loss near 0.9015
-First Target near 0.8620
-Secondary Target 0.8406
Risk to reward ratio on the first target is 1 to 5.
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EUR/GBP Elliott Wave Count Nov 28 2017
Conclusion
In closing, by trading GBP in weak against the USD and strong against the EUR, if one trend prevails over the other, the goal is for the gains of the dominant trend to make up for the losses in the weaker trend.
Keep in mind that it is possible to lose on both legs of the trade. Therefore, implement conservative or no levels of leverage.
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---Written by Jeremy Wagner, CEWA-M
Jeremy is a Certified Elliott Wave analyst with a Master’s designation. Read more of Jeremy’s Elliott Wave reports via his bio page.
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Other Elliott Wave forecasts by Jeremy:
EUR/USD Elliott Wave analysis points to higher level.
Gold price pattern still bearish yet silver prices sport a cleaner pattern. [Webinar recording]
