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How to Trade the Next EUR/GBP Breakout

How to Trade the Next EUR/GBP Breakout

2016-02-18 19:55:00
Walker England, Forex Trading Instructor
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Talking Points

  • The EUR/GBP Has Advanced as Much as 561 Pips for February
  • Bullish Daily Breakouts Began Over .7789
  • SSI is Bullish, Reading an Extreme -2.99

EUR/GBP Daily Chart

How to Trade the Next EUR/GBP Breakout

(Created using Marketscope 2.0 Charts)

Losing Money Trading? This Might Be Why.

The EURGBP is retracing this week, after advancing as much as 561 pips from the start of February. Traders looking to validate this uptrend can look to the 200 period MVA (Simple Moving Average) which is now trading 488 pips below today’s price action. It should also be mentioned that SSI (Speculative Sentiment Index) is also reading at an extreme for the pair. Currently SSI is positioned at -2.99, which stipulates that there are nearly three positions short for every one position long. When taken as a contrarian signal, this SSI reading can also be used to validate the markets current uptrend.

EUR/GBP Daily Chart

Please add a description for the image.

(Created using Marketscope 2.0 Charts)

Traders looking to trade a breakout can plan to enter the market on a new daily high. As seen in the graph above, the current daily high resides at a price of .7897. To help identify potential entry orders into the market, traders may choose to use a 20 period Donchian Channel. This way, in the event of a breakout an entry order will be pending, and ready for execution. Conversely, traders should also watch the current 20-day low, which is found at a price of .7525. If prices reach this point, it would invalidate any potential bullish breakout. In this scenario, traders may select to reevaluate the trend or look for other opportunities elsewhere.

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