Trade of the week: short EUR/GBP

(AI video summary)

Current trade overview: short position

In the current market environment, a compelling trading opportunity has emerged with the EUR/GBP currency pair. While the daily chart shows a clear uptrend, the weekly timeframe reveals a more complex picture with multiple resistance levels converging around current prices.

Trade setup

• Entry point: short EUR/GBP at 0.8639, targeting the cluster of resistance levels
• Stop loss: set above 0.8770, positioned above the November 2023 high to account for potential false breakouts
• Target: aim for a downside target around the 0.8400 area, representing a longer-term reversal objective

Risk-reward ratio

This trade setup offers a favourable risk-reward ratio for those willing to take a longer-term view. The stop loss is positioned above multiple weekly highs to provide adequate protection, while the target represents a significant move that could unfold over several weeks or months.

Market context

The euro has shown strength against the British pound in recent months, but technical indicators suggest this momentum may be waning. The convergence of multiple resistance levels, combined with the Elliott Wave count, creates a compelling case for a potential reversal.

Trade updates

The previous trade of the week from last Monday showed strong performance, with the long position entered around 3,285 moving favourably within three days, though it did not quite reach the 3,400 target.

For those still holding the USD/JPY short position from 23 June, consider moving the stop loss to breakeven levels following the decline to the 1.4300-1.4400 support area.

Cautionary note: while this trade presents a structured opportunity, market conditions can change rapidly. Traders are advised to consider their risk tolerance and market outlook before engaging in this trade. This analysis is for educational purposes only and should not be considered as personal trading advice.