EUR/GBP has turned from a investment pair into a trading pair. Ever since the financial world became unglued (late 2007? Summer 2008?) the pair has been much more volatile. There are many more short term opportunities to trade the pair on an intraday basis. Additionally, on a long-term view, we are at a level of significance from many months ago.

On an intraday basis, EUR/GBP has set up for our favorite “false breakoutpattern. In the below 2 hour candlestick chart, the pair closed one timeframe outside the lower Bollinger Band, and then returned to close inside the Bollinger Bands in the next candlestick. We are confident in a move higher through out the day and into tomorrow.

For a short term trade, we buy at market (currently bid at .8507) with a Target level of .8563 (top of the Bollinger Bands) and a Stop Loss order at .8475 (right at today’s earlier lows).

For the longer timeframe, the .8420 – .8520 level attracted a lot of interest back in November of 2008. The chart of daily price actions showed the entire month of November to be a battle of bulls and bears. The move from those levels took us up to the .9800 levels; a move of approx 14 big figures. So we expect that there will be a lot of buying and selling interest at these levels again and we will wait to see the outcome. As we expect a 10 plus big figure move once the direction is settled, we are in no rush to jump in early; there will be plenty of room to position oneself.

UPDATE – Our July 27 Short EUR/CHF position finally hit our Target Profit level (anything in the 1.51xx range) on Thursday July 30th.

Update – We remain long EUR/USD from our blog post at the end of last week. We continue to target the 1.4700 area

Stay Nimble!

Stephen Leahy
Back Bay FX Services, LLC

Thanks to FX Solutions for the below image.