News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bullish
Oil - US Crude
Mixed
Wall Street
Mixed
Gold
Bullish
GBP/USD
Bearish
USD/JPY
Mixed
More View more
Real Time News
  • Dollar Index has broken major uptrend support and risks accelerated losses into the December open. Get your $USD technical analysis from @MBForex here:https://t.co/Txo8l8S1f1 https://t.co/YLVzP95JH8
  • The MACD is an indicator that uses exponential moving averages (EMA) to determine trend strength along with entry points based on crossovers. Find out how you can use the MACD as a buy/sell signal here: https://t.co/qxnP99uqTQ https://t.co/tGVqSZ2zK3
  • Support and resistance are the cornerstone of technical analysis, making it the foundation that you build your knowledge on. Build a stronger foundation here: https://t.co/yXLaRpl90I https://t.co/reMoYpqkQO
  • Struggling to define key levels? Floor-Trader Pivots assist traders in identifying areas in a chart where price is likely to approach and can be used to set appropriate targets, while effectively managing risk. Learn how to use this indicator here: https://t.co/Ye4m1FMKUW https://t.co/sqeRL7Rf7u
  • Cyclical and non-cyclical stocks can help diversify a trader’s equity portfolio. Get your guide to understanding these stocks here: https://t.co/h7BKTd2J8N https://t.co/ukOW0dWJxf
  • Beautifully put. https://t.co/0fBsmUH6Pb
  • Gold prices could claw back lost ground ahead of the non-farm payrolls report for November, buoyed by a dovish FOMC, falling real yields and rising inflation expectations. Get your $XAUUSD market update from @DanielGMoss here:https://t.co/3mqut0yQIQ https://t.co/nfyycibwKM
  • Recessions can devastate the economy and disrupt the fortunes of individuals, businesses, and investors. But economic decline in the business cycle is inevitable, and your trading can be defined by how you respond to crisis. learn how to prepare here: https://t.co/e4CnobJCss https://t.co/UWnLJHVPN4
  • Rather than focusing on earning a specific number of pips per day, traders need to focus on what can be controlled. In trading terms this relates to following a strategy perfectly, with no emotion or hesitation. Learn more here: https://t.co/6ZH026QLRN https://t.co/JJIyKh8r1l
  • That if you’re offended by what someone says on Twitter and that ruins your day, you live an extremely lucky life to be able to have that be your biggest problem for the day. https://t.co/H9KQjR3ViK
A Clever Scalp Set-up in EUR/GBP

A Clever Scalp Set-up in EUR/GBP

2014-05-28 16:05:00
Kaye Lee, Head Forex Trading Instructor
Share:

Talking Points:

  • EUR/GBP Closing in on Strong Resistance
  • Narrow Zone for Initiating New Shorts
  • One Conflicting Signal Traders Must Consider

With the markets surprisingly short on set-ups recently, traders might be able to respond to the recent drop in GBPUSD by trading EURGBP instead. At the time of writing, EURGBP has already put in a daily range of 38 pips, which is approximately the average size of a daily bar for the pair. This suggests potential for short positions that go in the direction of the prevailing trend in EURGBP.

The four-hour chart below shows a potential turning point, with price approaching a declining line of resistance that has been drawn using more data than is visible on the chart. Although there is one previous and notable breach of this line, price quickly reversed, which lends credibility to the idea that the game is not over as far as sellers near these levels are concerned.

Guest Commentary: Respected Downtrend in EUR/GBP

A lengthy and well-respected declining trend line is shown on the 4-hour chart of EUR/GBP.

When choosing a possible resistance zone for initiating new shorts, however, it’s important to carefully consider the strong upward momentum on the below hourly chart. Thus, even though the daily average true range (ATR) has been reached, it is preferable to allow for a little more leeway.

Guest Commentary: Narrow Resistance Area for EUR/GBP Shorts

A narrow zone of resistance on the hourly chart of EUR/GBP can be used for initiating new short positions in the pair.

In all, the resistance zone selected is 0.8141-0.8153, which is a mere 12 pips deep. When compared to the 60 pips of potential downside required to challenge the lows, proper risk considerations are more than satisfied.

The below 15-minute chart of EURGBP lends credence to the idea that a short set-up may be in the offing, as price has recently exceeded the top of a wedge pattern. Should price touch the resistance area and then reverse back into the wedge pattern, it would signal a perfectly valid entry opportunity for pattern traders.

Guest Commentary: Wedge Pattern in Play for EUR/GBP

A wedge pattern on the 15-minute chart of EUR/GBP lends further validation to the case for new short positions in the pair.

For those who are more inclined to stick with traditional entry triggers, however, bearish reversal divergence as price touches the resistance zone would also be valid, as would bearish engulfing patterns and/or pin bars on the 15-minute time frame.

There is one strike against this trade, however: the Elliott wave count on the 15-minute chart seems to suggest that the current move is in fact a third wave that could produce one more spike up. Those wary of this factor could opt to wait for a fourth wave to appear before shorting the fifth wave instead.

However, traders may also believe, as I do, that the confluence of factors is good enough to justify taking two or three tries at this trade in hopes of entering in the direction of the trend on the higher time frames.

By Kaye Lee, private fund trader and head trader consultant, StraightTalkTrading.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES