It’s summertime. Expect fast, sudden moves, which retrace without reason, no volume, no moves for hours. Go away, as noone is in town. It might be the best advice for the next 5 weeks.
But if not, trade 1/2 size, take the longer view.
EUR/GBP is trading at highs prior the the FED and ECB decisions due later today and tomorrow. Monday the Pound took a swandive, while the Euro held. The Euro area is in no better shape than the british economy. No reason for the exchange-rate to make a sudden huge move. But in a low volume environment it sure is possible to move first the GBP/USD and then a day or 2 later the EUR/USD, producing a wide swing in the cross.
The daily is testing a breakout level and might actually try a run up.
But that’s not the whole picture. Looking at the daily, you want to look at the weekly as well.
And here we see some warning flags: The Tenkan crossing below the Kinjun and a falling trendline around 0.8750. And that’s not the only trendline we can draw.
Looking at a weekly chart starting in 2007 we see a huge triangle, which was broken to the upside in April 2011, but later resolved to the downside only to test the support becoming resistance blue line right now again.
This fuzzy resistance is around 0.88 right now, right where the EURGBP started trading 15 years back.
But enough, the FED is coming up tonight and I want to trade the retracement of an extreme move
The breaking of the cloud will trigger my short entry, as will a touch of the 0.8750 , 0.8775 and 0.8800 levels for a return to 0.8550.