The EURGBP continues to have a strong April moving steadily in a downtrend. Through today’s trading, the pair has moved as much as 214 pips lower from its monthly high at .8357. In our previous Chart of The Day discussions we have looked at breakouts to trade the creation of lower lows.
Our most recent position was added on April 16th, when fresh 2012 lows were broken under .8220. Pictured below, our last entry established our second open position on the EURGBP. As price continues to decline, traders again have an opportunity to add to a winning position. Today’s focus will shift from breakout trading strategy and focus on selling pullbacks on the EURGBP pair underneath resistance.
Zooming in to our current 4Hour chart on the EURGBP we can see the development of a new trendline. This trendline has been created by connecting the March 29th , April 3rd and 16th highs. As price descends we can use this line as a reference of resistance on our graph. If price holds under this descending level, trend traders will look for oportunities to open new positions. If price breaks above resistance, it would tempoarily call a halt to the addition of new positions.
One way to enter a pull back on the trend is by the use of an oscillator. Below we have the CCI indicator assisting us finding overbought and oversold values. CCI becomes overbought when the indicator dictates a reading over + 100. Traders will look for a swing below this value to enter in the direction of the established trend. Entries to sell the EURGBP should come under our resistance line described above , an seek to profit from the creation of lower lows.
My preference is to add to our existing EURGBP positions. Sell orders can be established on a turn of the CCI oscillator from overbought levels near .8190. Primary targets still reside at lower lows toward .8035.
Alternative scenarios include price retracing and breaking short term resistance over .8200
---Written by Walker England, Trading Instructor
To contact Walker, email WEngland@FXCM.com . Follow me on Twitter at @WEnglandFX.
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