Chart of the Week April 19th
EURGBP – The Pennant Coming to an End?
The EURGBP is coming into the Pennant which has held for over a year now but is the Euro going to hold against the Sterling this time? What is interesting to note about this pending touchdown is 2 pieces of information;
- The pair has closed lower 5 weeks in a row (assuming this one does)
- The pair is also coming into the final 10% of the formation
The last piece of data is what is most interesting to us. Why? Because pennant formations generally end within the last 10-25% so we are really pushing the limits here. This is generally the time when a pair is released from these formations and starts another move.
Also since the start of this formation way back in the beginning of 2009, the pair has lost more ground than its gained as the top of the pennant is at .9800 while the bottom is at .8400. Take the difference from current price (9400 – 8755 = 645pip loss) vs. (8400 – 8755 = 355pip gain) and the sellers have clearly been in larger control over the price action for now 1.5yrs running suggesting they are not going to give up control anytime soon.
The good thing is if you are a bull, you have a great risk/reward entry coming up just below 87 cents with about 4 cents of upside play. Should the pair break the formation though, 8500 becomes its next test as it’s the 61.8% fib of the last major upswing from 7700 – 9800. Beyond that, 84 cents is next and should the pair break and close below 84 cents, we feel a move back down to 8000 becomes very likely.
Chris Capre is the current Fund Manager for White Knight Investments. He specializes in using Ichimoku, Pivot Point and Price Action models to trade the markets. He has built and consulted for several institutions in using his Ichimoku Systems and has an Advanced Ichimoku Course for further training. For more information about his services or his company, visit 2ndskiesforex.com.