EUR/GBP : Action ! (300+ pips late)

Been wanting to short EUR/GBP for the longest time but have been idly watching it go lower and lower without getting on board for various reasons (was suffering serious drawdown and in no position to take on new risk when signals were generated + I was already long large GBP/USD). Two sell signals were missed on the weekly chart (see red circle) : 1. triangle break at 0.8790 and 2. taking out significant previous low at 0.8635.

Now, on the monthly/quarterly charts, we have a very significant break (see blue circle) below 0.8480 (last 0.8444) . Of course, there is some way to go before the end of the month/quarter so it's the usual tricky dilemma of 2nd guessing if we are going to get a good signal or not for the close of period. My usual way of handling this is to jump in with partial risk first and decide on the balance nearer the time. Enough of watching. Time for action.

Note the quarterly chart has had a near vertical parabolic rise and is now in the process of reversing. Such reversals have the potential of going far more than traders envisage. Of course, this is highly correlated to my existing long GBP/USD (see sub-chart on the left) but the EUR/GBP chart has a far cleaner look about it to make it a more attractive long term trade. Perhaps it is the short EUR/USD component that is going to iron out the volatility or cause the cross to perform. No point 2nd guessing and trying to be too clever. I will trade the EUR/GBP as a cross and keep it seperate from what I already have in GBP/USD.

Qualitatively speaking, the GBP/USD chart-point equivalent of 0.8480 on the EUR/GBP is at 1.7043. We are still a long way away from that right now (last 1.6504).

Addendum 07:04 am 22Jun09 : Sold EUR/GBP 1.1% EAR at 0.8464. For starters, lets aim for the next chart support on the weekly chart at 0.8186.