EURGBP—rally

Along with everything else, the EURGBP has been rallying. The rest of my short from .8340 profit-stopped at +135 pips in yesterday's rally. (It will be reported for June results).

The pair has rallied to a high of .8257 this morning where it is stumbling. The 20 daily SMA capped it the last time it got near here so that is one reason I shorted at .8234. I wrote yesterday that "It would be ideal if it could work its way up to the resistance at .8225/40." Well it got there so live by the sword, die by the sword. The other reason is that momentum (as represented by RSI) is stumbling on the hourly chart—it has closed below the overbought reading of 70. Finally, it's near resistance at around .8265/70.

So it should be a short. But honestly did anyone really expect the rallies we've had this morning? Yeah, well, now that they've happened people will say they did but that wasn't what most were posting late yesterday and even early this morning. The rallies may have more to do with decreasing liquidity in the market than anything else—we're heading for a summer Friday and in the US people are already leaving for the long July 4th weekend. In any case, I'm keeping my stop tight. Also, the longer it hangs around at this level the less likely I am to stay in the trade, partly because of the holiday and partly because I don't like pairs that loiter near resistance. Bang on a door long enough and eventually it gives way.

After this, resistance is at .8300, .8380 and .8400. If it gets beyond that I'll be surprised but that's nothing new. Support is at .8180, .8107/00, .8068, .8000 and .7900.

Here's the three-hour chart:











© Dianne Fecteau, 2010. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.