Forex Trading Setup 11.4.2010 – EUR/GBP Targets 0.8550

Forex Trading Setup November 4, 2010
Technical Analysis Tools:
Simple Moving Average(SMA) 50-period (red), 200-period (bold, gray)
RSI-14 with Simple Moving Average 5-period of RSI attached.
Fibonacci Study
Elliott Wave Principles
Market and Price Action  (patterns, candlesticks)
Multiple Time-Frame Analysis

EUR/GBP Targets 0.8550

• 1H and 4H: This is a follow to yesterday's "EUR/GBP Ahead of the BoE and ECB Event Risks". Now that the event risks are over, the market does not seem to be shocked. Both central banks left rates as is. For more on the decisions and statements, refer to: BoE and ECB Holds No Surprises...
• Trichet does is about to make a speech, so I will be seeing if there is any reaction as I write this post. (looks insignificant so far)
• The 4H chart shows the market completing a correction projection to just above 0.8800. This failed to break above 61.8% retracement, and the RSI remained below 60 so far.
• For the bearish scenario to have a chance, the market needs to confirm by breaking below the 0.8750 pivot seen in the 1H chart. If the market can also break below the pattern support, that is a strong signal, but we may get some early signal from a break below 0.8750.
• So that is your 1st signal for your bearish scenario, a break of 0.8750 (and possibly a break of the pattern).
• A second clue could be, a pullback that confirms by failing to rally back above 0.8785 area. The break of the pattern can come before or after this pullback.
• A third clue is the RSI breaking below 40, and a stronger one would be a break below 30, but by that time, price may have already made a significant down move.
• These are clues to the first target at the 0.8650 pivot. A break of that then points to 0.8550. The 0.8790 is a threshold for this scenario, so a break above that should invalidate it.