FMFX

EURGBP Week End Wrap

The EURGBP has rallied for the last 2 trading weeks. But the trend gained considerable strength this week as the bulls targeted the short term resistance level at 0.8880. However, despite the momentum of this trend, I saw too many bears in my Twitter and StockTwits streams this morning. It seems the plan is to step in front of this train as it nears 0.8880 level where price has failed at this level 3 times prior. While seemingly logic, it actually isn’t.

First off, follow the trend, especially a daily chart trend. This rally is a result of another failure at the 0.8650 level, a short term support level on the daily chart. A trend that has rallied over 200 pips shouldn’t be ignored. Plus, the failed low is a higher low - a subtle bullish hint.

Secondly, when a currency pair looks to challenge a level more 2 or more times, it is usually a hint of an eventual breakout of that particular level. My mentor taught me that.

Third, there is NOTHING bearish about this candle. What we need to watch for in the new trading week ahead is if the next candle puts in a wick like the 3 times before it.

Remember that the European Central Bank President speak tomorrow when the markets are closed. With the European sovereign debt crisis in full swing, market participants will listen carefully as to whether or not Trichet chooses to finally acknowledge the crisis with monetary policy. The market will execute judgement on Sunday at the open.

Enjoy the weekend!