The EUR/GBP pair has been higher for the year dating back to its January 10th low at .8284. Over the last seven months price has climbed higher with a new yearly high being established at .9082 on July 1st. Today’s price action shows support being tested and holding above .8750 A bounce higher will give traders optimal chances to enter back with our broader trend.
Fundamentally, both the Euro and the Pound have been weak across the board. In a race to release bad economic data the UK posted a 24.5k change in Jobless claims early in London trading. This economic release may give the EUR/GBP the boost it needs to resume its upward trajectory.
Price Action
Moving to an 8H chart, we can see price trading in an upward directed price channel. Support is currently found at .8750. Resistance can be found at the upper channel near .9100. When trading these patterns we can use an oscillator to confirm a bounce off of support. Today we will look for an 8H candle close with CCI (20) rebounding from the oversold region (-100) to trigger out trade.
Trading Opportunity
My preference is to buy the EUR/GBP using a CCI trigger on a 8H candle close. Entry’s should be made as close as possible to the .8800 price handle. Limits should be set at .8980 or better, setting up for a minimum return of 180 pips. Stops should be placed near .8710 or better risking 90 pips for a clear 1:2 Risk/Reward ratio.
Alternative scenarios include price breaking support and the EUR/GBP trending lower.
Walker England contributes to the Instructor Trading Tips articles. To receive more timely notifications on his reports, email instructor@dailyfx.com to be added to the distribution list.
