4Xlounge Technical Review – EUR/GBP – January 31, 2012

The 4Xlounge Technical Review has been designed to provide a detailed analysis of the most actively traded currency pairs with the help of a number of our own proprietary technical indicators. Here we aim to identify those pairs with the strongest trends so traders may position their own accounts in-line with the current strength of the Forex market and the flow of capital. Today we will focus our attention to the EUR/GBP.

The 4Xlounge Technical Dashboard Console displays each currency pair along with its Global Trend Value, which illustrates the current strength of its trend. Each pair’s trend is measured on a scale of 0-99, with figures greater than ‘30’ indicating a ‘significant’ trend. Furthermore markets moving to the upside are painted green, while those to the downside are painted red. Below the EUR/GBP currently has a Global Trend Value reading of (-) 46 indicating this pair currently is experiencing a strong push lower. In addition we may consider the individual time frames shown by the dials that extend from left to right, alongside each currency pair. The shorter-term time frames (on the left hand side) show a relatively stronger trend (to the downside) than the daily time frame (to the far right-hand side) indicating this overall trend to the downside has accelerated more recently and shows the potential to accomplish ‘lower lows’ in the near-term future.

4Xlounge Technical Dashboard Console - January 31, 2012

Taking an even closer look at today’s trading activity we may consider the 4Xlounge Short-Term Market Barometer, which based on very short-term charts, shows the activity in the Forex market during the early hours of the US trading session today (Jan 31, 2012). The Market Barometer depicts each currency with its own individual line, and we can see as volatility returned to the marketplace, the EUR remained on the lower end of the chart while the GBP was nearly the strongest currency on the chart, with the exception of only the JPY. As long-term trends are comprised of a good amount of short-term moves, today’s weakness in the EUR/GBP may be interpreted as just a part of a longer-term trend to the downside.

4Xlounge Short-Term Market Barometer

Finally we may also consider the actual price charts to get a better idea of how strong this trend (to the downside) is, and its most likely near-term future. The following (daily) chart shows the EUR/GBP as it has enjoyed a steady trend to the downside and still remains inside its long-term channel (primary trend). Furthermore a steeper (secondary) trend has now emerged as the EUR/GBP as the pair has been able to accomplish ‘lower lows’ and ‘lower highs’ in the past few months. Of course if the EUR/GBP is eventually able to break to new yearly lows the selling pressure may then accelerate as buyers decide to step aside until further support can be established.

EUR/GBP - Daily chart - January 31, 2012

Putting this all together, both the short and long-term indicators show the EUR/GBP is in the midst of a significant trend to the downside. With that said, traders looking to taking advantage of this trend may also position their accounts to ‘sell-short’ the EUR/GBP. Of course deciding at what price level to open the trade, position size, and appropriate protective stop order are all-important factors in finding the trade with the best probabilities of success. But at the most basic level it is important that we first identify the trend, and do our best to take advantage of this trend as long as it may persist.

We wish you the best of luck in all your trading endeavors.
Sincerely,
Adam Rosen
adam@4Xlounge.com