EUR/GBP Continues Choppy Consolidation within a Triangle

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EUR/GBP Continues Choppy Consolidation within a Triangle

The EUR/GBP is not showing any indication of direction outside of the intra-session swings. It  has become very choppy in December as we can see on the 4H chart.

EUR/GBP 4H Chart 12/12
eurgbp 4h chart 12/12
(click to enlarge)

Choppiness; Broken Trendline: In the 4H chart, we do see a slight bearish bias heading into December. However, as we come to an end fo this week, we are seeing this bearish bias taken away by a bullish push that broke above a falling speedline from mid-November’s high of 0.8038. With this breakout, the 0.8038 high is back in sight.

Now, there is as much risk towards the November high as there is to the downside towards the November low around 0.78.

Slight Bearish Bias: we are going to have any bias, we should probably have a bearish bias in the medium-term. When we look at the daily chart we can see that price has been sideways since September, but was bearish before that, and thus the bearish bias.

EUR/GBP Daily Chart 12/12
eurgbp daily chart 12/12
(click to enlarge)

So, if price does rally back towards the 0.80-0.8065 area, look for sellers. Although the bearish bias would be weak at that point, the reward to risk ratio of a sell would be attractive.

Trade Plan/Reward to Risk:
Let’s say we put in an entry at 0.8020. This would be below November’s high, but we should allow some elbow space above that high, even if that means a break from a projected triangle resistance seen in the daily chart. The 0.8035-0.8065 area is an even more important resistance area.

So, the stop-loss might be 0.8080, at which point, the market may have turned bullish. There might still be a pullback, but at this point, with the bullish correction scenario in play, the bearish outlook might have to be limited to 0.80.

Currently, within the consolidation range, a conservative outlook targets the 0.79 handle, which represents the “central pivot” of the range. A more aggressive bearish outlook targets the 0.80 September low.

The reward to risk ration for the conservative target would be 120:60, or 2:1. The aggressive outlook has an R:R of 220:60 or 3.66:1.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.