Triple Top Could Dash The Euro’s Hopes
Ross Woodfield | Aug 28, 2014 02:42AM ET
The Euro has recovered quite a bit of ground against the GBP over the course of August but the formation of a triple top could signal a reversal of the Euro’s fortunes.
It is no secret that the EURGBP pair is stuck in a downward sloping channel as the threat of deflation weighs heavily on the Euro. Recently the Euro has bounced off the bottom of the channel and moved up towards the centre of it. The Pound has suffered from some slightly disappointing economic news that culminated in a downgrade of GDP and wage growth forecasts. The Euro benefited from some positive PMI and Unemployment results.
What we are seeing on the H4 chart looks like a triple top that could signal a reversal of the current euro strengthening and a return to the bearish trend. The below chart demonstrates the neck line of the triple top. We can see the price has moved below and is now using it as resistance. The price could reject off this level, confirming the structure, rather than breaking through it, which would invalidate it.
Interestingly, if we extend the neck line back up the channel we can see this line forms the centre of the channel and a line that the price uses as a point of reference. On a number of occasions, the price has touched this line and bounced back off it, so it is no surprise that the centre of the channel is forming the neckline for a triple top.
It would be no surprise if the EURGBP pair looks to bounce off the neckline and head lower. If this is the case a fairly tight stop loss could be set just above the neckline to minimise any losses in the event of an upside breakout. Look for previous levels of support as possible exit points for a short position, such as 0.7937, 0.7920, 0.7887.
Get The News You Want
A Triple top has formed on the EURGBP H4 chart with the neckline being the centre of the bearish channel. Look for a bounce off this line as the pair resumes the bearish trend.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.