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eur / gbp / usd Monday update

11/29/2010

Euro is the biggest loser of post thanksgiving trading.

Fundamentally, the EU, IMF and Ireland reached some sort of agreement in Ireland over the weekend. I don’t pretend to care about all the details and there are better commentators than I out there who will tell you what impact this will have on the Euro – and then tell you what they missed once the price action moves the opposite direction. The main point is, this may provide temporary relief to euro selling if you believe 1, the deal will actually help Ireland; 2, the agreement is comparable in fairness to the one reached earlier this year with Greece; 3, MSNBC tells you so.

On the other hand, selling may continue or accelerate if you believe the opposite of 1 – 3 above, AND if this now turns the attention of the IMF to Portugal and Spain. A word of caution, Commentators were predicting a change of focus from Greece to Ireland last March, calling for prices to fall below 1.17 and 1.14. I don’t know about you, but sitting out a 2,000 point “correction” while shorting lows and waiting for the IMF to figure out what the hell it’s doing seems like a really bad idea.

That’s why I trade technically. So, technically speaking:

Eur/Usd is currently sitting on the daily 50% back of the up-move from June, while Gbp/Usd is coming up on the .382 back. In addition, euro is below all 3 significant daily MA’s, while Gbp is still above the 200 daily.

I’m not ruling out a bounce here at the 50%, we are still in a strong downtrend. I am looking for retracements to the hourly MA’s as selling opportunities into the .618 retracement. If this level holds, I will look to get long, if this level breaks, I will look to continue selling.

GBP has broken its ascending wedge pattern to the downside. This is the same story as the euro. We may see bounces at the .382, and I will consider shorting on pullbacks down to the 200 daily.

My favorite trade though is currently the Eur/gbp. This is the trend continuation trade I highlighted last week in my rant here:

Stops at break even!

We are still in the downtrend I illustrated, we’ve broken below the daily MA’s and the pair finally broke below the range it’s been sitting in since about 11/12. We have downside targets at the .618 retracement followed by the lower rising trendwall. Because of the eur/usd and gbp/usd price action, I think there is further downside potential in this pair. So long as the upper border of the recent downtrend holds, I am happy to let this trade work for itself. All hourly ma’s are moving sideways, so I’m not currently looking for additional selling opportunities (yet).

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