EUR/GBP Working on Bearish Price Sequence, Update on USD/ZAR Set-up

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EUR/GBP runs into confluent resistance, bear-flag forming

This is a pick that I know some of my long-time webinar attendees are going to call me out on, and rightly so. It’s not much of a secret that I am not a big fan of EUR/GBP, its choppiness I find rather unappealing. But as choppy as it has been long-term, the set-up here is hard to ignore.

The sequence off the August high has actually been quite clean. The recent bounce has EUR/GBP up against confluent resistance and thus far it is finding opposition. The second part of this set-up is the bear-flag forming, most visible on the 4-hr chart.

A break of the lower parallel should have EUR/GBP rolling downhill again, with the monthly low of 8723 first targeted, followed by the April low at 8620. The exact price of the break depends on when it breaks and where the 4-hr bar closes once it does.

But getting under 8798 will take out the last swing-low within the pattern and thus can be used as price confirmation. Stops placed at 8850 will be sufficiently out of the way. A move to the eventual target of 8620 allows, even with some profit-taking along the way, a solid risk/reward trade.

EUR/GBP Daily Chart (Confluent resistance)

Check out the intermediate-term forecast for EUR and GBP in the DailyFX Q4 Forecasts.

EUR/GBP 4-hr Chart (Bear-flag)

USD/ZAR Head-and-shoulders may shape shift into wedge

Last week, I looked at USD/ZAR with the idea that a head-and-shoulders formation could lead to lower prices. Since then we have seen solid support hold, meaning no official short signal has been given yet. The bounce off support has price wedging up with a resolution possibly coming in either direction depending on which way price breaks.

A breakdown below support would obviously have the same outcome as the H&S scenario, with 1310 targeted. While an eventual wedge breakout to the top-side could have the underside of a trend-line from 2011 in play near 16. Now we wait…

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USD/ZAR Daily Chart (waiting for a break…)

***Updates will be provided on these ideas and others in the trading/technical outlook webinars held on Tuesday and Friday. If you are looking for ideas and feedback on how to improve your overall approach to trading, join me on Thursday’s for the Becoming a Better Trader webinar series.

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX