Last week I wrote about EURGBP, saying it’s now time to buy the pair. When I published that article, it was trading at 0.8380; it’s currently trading at 0.8442… about 60 pips higher.
Sixty pips is pretty solid, especially considering EURGBP’s pip value is worth more than most pairs. One standard lot yields ~$12 per pip compared to $10 per pip for something like EURUSD.
But in that article I was looking mostly at the daily and weekly charts. Today I’m drilling down to some lower timeframe charts to show you how this trade is developing and why I’m feeling increasingly bullish.
Remember, it’s a long term trade
I wrapped up last week’s post about EURGBP stressing patience. This isn’t a trade I’m hoping to nab 100 pips with and be done. I’m looking to position us for a longer term move and to really capitalize on it.
That means staying extremely patient, allowing the tide to turn from a state of consolidation to a continuation of the overall bullish trend. That means this trade isn’t for everyone, but it’s definitely for me 🙂
SMA crossovers on lower timeframes
When we drill all the way down to the 15-minute chart, there’s a clear bottoming characteristic to it.
Notice how on the way down the SMA’s were purely aligned and pointing lower. Then we entered a choppy phase where there was a lot of criss cross action in the SMA’s.
We’re now in a state where the SMA’s are purely aligned again, but this time it’s to the upside. This is a great first clue that we might be heading higher, but it’s still a 15-minute chart and therefore not that reliable.
What’s the hourly chart telling us?
The hourly EURGBP chart is where things start getting interesting. Take a look at what’s going on:
For the first time in a long time the SMA’s are purely aligned to the upside. The 50-hour SMA is trading above the 100 and the 100 is trading above the 200-hour SMA.
This means our 15-minute time frame and 1-hour time frame are both entering bullish trends. This is obviously great news for our long position, and it’s a big reason why I added more to our core long position earlier this week.
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It’s great to see this trade developing as planned, but what now? What key levels are we watching for even more confirmation that the bullish trend is ready to resume?
A look at the 4-hour chart
Price is already trading above the 50-bar and 100-bar SMA’s on the 4-hour chart:
I love to seeing this type of behavior. The more time we spend above the 100-bar SMA right now, the better. But there are a couple things I’ll be keeping an eye out for to further confirm my bullish bias.
The first is a cross over of the 50 and 100-bar SMA’s. As you can see, the 50-bar SMA hasn’t been trading above the 100-bar in quite awhile. The next would be the 50-bar SMA crossing the 200. Finally, we’d like to see both the 50 and 100-bar SMA’s cross the 200-bar SMA.
That would put the SMA’s in an aligned pattern to the upside and would be very bullish. At that point, price would be trading above the 200-bar SMA too, so that’s something to watch for also.
I hope revisiting my post from last week is helpful in showing how I think about longer term trades and what I look for to confirm they’re developing satisfactorily. Please shoot me any questions in the comments.