EUR/GBP, a guide? | Forex Factory

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EUR/GBP, a guide?

  • #1
  • First Post: Aug 30, 2012 4:41pm Aug 30, 2012 4:41pm
Right now I kinda got my head messed up and I would like to hear some suggestions. A logical assumption would be that someone uses EUR/GBP in order to check which of the two currencies would be the strongest against the dollar. In this sense we would use EUR/GBP as a guide.

However, EUR/GBP is also traded the other way around. People watch the EUR/USD and GBP/USD and make entry decisions for EUR/GBP based on which pair is about to hit the strongest levels/bullish/bearish market structure. In this sense EUR/GBP is traded itself and the EUR/USD and GBP/USD are generating the chart for EUR/GBP.

This last one however is saying EUR/GBP is not working correctly as a guide. It is simply the result of levels/market structure from the major EUR/USD and cable pair. Now I am well aware obviously "EUR" and "GBP" are traded against other currencies besides USD as well but this doesn't take away that the majors are generating the core of EUR/GBP.

Would anyone like to share their experiences on this matter?
  • #2
  • Aug 30, 2012 5:08pm Aug 30, 2012 5:08pm
Quoting Robertk
Would anyone like to share their experiences on this matter?
Yes, in general thinking that way will not help you. Better to trade each chart seperately. One does not predict the other partly because you can never tell which s/r will hold and which will not.
  • #3
  • Edited 6:21pm Aug 30, 2012 6:01pm | Edited 6:21pm
Quoting Hugh Briss
Yes, in general thinking that way will not help you. Better to trade each chart seperately. One does not predict the other partly because you can never tell which s/r will hold and which will not.
You can never tell for sure. However, it might increase your chances on a lot of trades. Let me show an example today that completely kills the theory about EUR/GBP not being a guide.

The below clearly shows that a check on EUR/GBP would have improved your odds of shorting EUR ( in case of dollar power ) or longing the GU( in case of dollar weakness ) by a bunch. That is why this is so confusing. EUR/USD was being on a good support. Cable wasn't. Yet EUR/GBP gives a smooth drop. EUR/GBP was the first here to signal for a downmove. EUR/USD followed.

EUR/USD
http://i45.tinypic.com/9ka3gg.jpg
EUR/GBP
http://i45.tinypic.com/15pjwo7.jpg
  • #4
  • Aug 30, 2012 6:24pm Aug 30, 2012 6:24pm
One more picture. Could not add this one in previous post for some reason.
Anyway, at that time cable did not move at all. In other words. The break of support confluence followed by a further down move for EUR/USD was not because of good dollar strength. It was merely the result of EUR/GBP pointing downwards.

A slight DXY move would therefore trigger a big move on the weaker pair.

GBP/USD (same time)
http://i45.tinypic.com/156bdxw.jpg
  • #5
  • Aug 30, 2012 10:42pm Aug 30, 2012 10:42pm
Hmm, well if you think it helps. It looks to me like you're going round in circles to convince yourself. How many times does eurgbp go down when eurusd is going up? It is something I have tried in the past I can't see any benefit to it as generally you end up confusing yourself and missing the point of what you are doing. Just my opinion and I hope you can make it work for you.
  • #6
  • Aug 31, 2012 2:29am Aug 31, 2012 2:29am
Quoting Hugh Briss
Hmm, well if you think it helps. It looks to me like you're going round in circles to convince yourself. How many times does eurgbp go down when eurusd is going up? It is something I have tried in the past I can't see any benefit to it as generally you end up confusing yourself and missing the point of what you are doing. Just my opinion and I hope you can make it work for you.
I am still seeing for myself if the pros are outweighing the cons. The problem that I have seen multiple times are the conflicting signals which in the end cause hesitation in execution.

Another approach would be to simply open a trade on the pair that would give you less risk ( for example if your stop is tight but can still cover a good keylevel ). At least you can fully control R:R. Chance% up from EUR/GBP still gives a good chunk of random outcome.
  • #7
  • Aug 31, 2012 3:33am Aug 31, 2012 3:33am
You can gauge pound strength by looking at EUR/GBP and Aussie strength by looking at EUR/AUD. It's not something exact, more like bias. I never open a GBP trade (anything GBP) without looking at E/G and same for AUD.
Let me put this into perspective, E/G has been chopping but E/A has been sliding nicely so I'll give an example on the later.
E/A fell on the daily, you can say trending down nicely from early-mid June, Aussie was unstoppable, many peeps shorted and predicted reversal but it hasn't happened until E/A broke the daily down trendline about a fortnight ago. Look at Aussie - turned down in sync with the reversal on E/A.

A peculiarity of E/G, UK banks are on the bid near end of the month, buying Yuros as UK pays their share into the EU budget.

Bottom line, don't be buying £££s when E/G is flying and never short cable when E/G is bleeding.
Quoting Robertk
Would anyone like to share their experiences on this matter?
forget about tomorrow, just steal away into the night
  • #8
  • Sep 2, 2012 6:10am Sep 2, 2012 6:10am
Quoting spekitox
You can gauge pound strength by looking at EUR/GBP and Aussie strength by looking at EUR/AUD. It's not something exact, more like bias. I never open a GBP trade (anything GBP) without looking at E/G and same for AUD.
Let me put this into perspective, E/G has been chopping but E/A has been sliding nicely so I'll give an example on the later.
E/A fell on the daily, you can say trending down nicely from early-mid June, Aussie was unstoppable, many peeps shorted and predicted reversal but it hasn't happened until E/A broke the daily down trendline...
Spekitox, first of all, thanks for your respond! The thing you mention:
"It's not something exact, more like bias."

I agree this will most likely work out on higher time frames as you said. However, I am trading one minute charts and one minute charts only. What I was watching for previously were "levels of impact". When I was about to open a position on cable or EUR/USD I first watched what EUR/GBP was potentially going to do the next couple of minutes. An ideal scenario would be EUR/USD AND EUR/GBP being at a big resistance zone with the correct bearish price interaction with this zone. I however noticed that this often is not the case. Most of the times it is giving conflicting signals instead which is causing hesitation in execution.

Perhaps to remove this hesitation it is better to simply observe the overall trend of the day a few times a day like you mentioned. It would make sense. Thanks again. I also see you gave some good advice in other people's topics so here's your V. The first one I have ever given away
  • #9
  • Last Post: Sep 2, 2012 9:06am Sep 2, 2012 9:06am
Kind thanks. Hope this one is for keeps, ha-ha Good luck with your trading.

Quoting Robertk
so here's your V. The first one I have ever given away
forget about tomorrow, just steal away into the night
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