Hello Forex traders!
Today, I wanted to start with an update on the EURGBP trade setup which I was sharing with you last week. In case you missed that, please read the link here.
In case you wanted to read more about EURUSD and AUDUSD, please do so via this link.
In the article I mentioned that step is to “let the 5 waves on a lower time frame complete and then wait for an ABC correction back towards the 50%, 61.8%, 78.6% and 88.6% Fibonacci retracement”.
Has the EURGBP completed the above? Well partly yes.
1) Nobody needs to be an expert wave counter to see 5 waves completed.
2) There is also divergence between the two recent tops.
3) Plus the Fibonacci -0.272 target at 0.8510 has been hit after price bounced off of the 38.2% Fib retracement level.
There are strong arguments to expect a 3 wave (ABC) correction downwards back to support at the Fibonacci retracement levels of the entire up move (Fibonacci retracement levels on the right side of the screenshot). And that is why I personally would not be interested in trading the EURGBP long at the moment – primarily due to the divergence.
BUT it is important to setup confirmation signals of this analysis because price has the tendency to continue further than Forex traders usually anticipate:
a) The break of the uptrend channel (purple)
b) The break of horizontal support (magenta)
Once the correction to the downside has been completed then I am looking for a positon and swing trade opportunity to the upside at the 500/618/786/886 – see previous article.
Last week we also mentioned the Gartley pattern on the GBPAUD and it is time for a review and update of that trade setup, click here for part 2. And here for part 1.
The daily chart is showing a strong continuation with bearish daily candles making lower lows and lower highs. The Gartley pattern (a deep crab) has its target all the way down at 1.63810 which is 1.618 of XA OR at the 1.60 price level which is the 2.618 of BC. The Fibonacci retracement levels from the daily Fib are near the above mentioned targets as well (green lines) which provide confluence to the retracement levels. The conclusion is simple: there is tons of space remaining to the downside. So let’s zoom in.
The lower time frame (4 hour chart) is showing a very neat down trend (blue channel). The first bounce was a 38.2% retracement (purple circle), where as the most recent retracement bounced off of the 50% Fib (orange circle). Price first paused at the purple -272 target and then paused at the orange -272 target. The next target is the -61.8% target and for both of those Fibs the targets are nicely lined up at +/- 1.67 (green circle).
The 1 hour chart is showing us that if the current bottom at 1.6748 breaks, then there is another 48 pips space down to the target. That target is limited in its space which means that catching any break south can only be done on a small time frame like a 15 min chart which would justify the reward to risk. However, a retracement back up to the 50% or 61.8% retracement allows for plenty of space back down to the 1.67 level.
Are you looking to trade the EURGBP and/or GBPAUD as well? Please share your comments down below – it is much appreciated!
As always, thanks for sharing this article as well!
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