The daily chart displays
Double Bottom: The trend reversal formation has been completed by the break of the resistance (=top between the two lows) at 86.55 on 21.08.09. The second bottom (0.8450) did not quite reach as low as the first (0.8430)
Trend Reversal: The daily chart moved from a downtrend (lower highs / lower lows) to an uptrend (higher highs / higher lows). After the lower high on 24.07.09 (= the between the double bottom pattern at 0.8650, daily close) the price formed the characteristics of an uptrend in the chart
- higher low (05.08.09; 0.8480)
- higher high (27.08.09; 0.8830)
Currently we are seeing a retracement from the higher high at 0.8830. This retracement can be used as an entry for a long position. To determine the entry point I will wait for a reversal patter (like a "Hammer" candle) in the daily or 4hr chart. Currently the retracement stands at the 38.2% Fibonacci level. The price might drops further to the zone between the 50% and 61.8% Fibonacci level. This zone (0.8650-0.8680) falls together with the top between the two bottoms of the reversal pattern. This former resistance had been broken and acts now as a support. A reversal candle in this zone would be a strong entry signal for a long position.
Trading Strategy: Wait for a reversal of the current retracement to enter a long position on the EUR/GBP. Consider the support level between the 50% and 61.8 Fibonacci level.
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