Euros To Pounds Today - Daily Chart January 27th 2009

Euros To Pounds Today - Daily Chart January 27th 2009

Well as suggested yesterday, we were wise to wait for a confirming signal which duly arrived with a wide down bar on the day. We now have a classic three bar candle pattern with the doji, followed by the evening star and finally the confirmation candle of yesterday, indicating that in the short term the move is over. Whilst this is encouraging, it is not strong enough to open a long term short position, and for this we need to see penetration of the 9 and 14 day moving averages which have remained intact.

In my view the euro is extremely over bought at the moment, and to add weight to the above analysis we need to look at the head and shoulders which has been forming in the last two months. This is now starting to look like an increasingly important signal in the $echnical analysisthe currency pair. For those of you new to $echnical tradinghead and shoulders is as it sounds – in essence the chart pattern creates an image of a head with two shoulders ( one each side) and is one of the classic signals of bearish sentiment in the market and an opportunity to trade short.

On the fundamental front, the only news of significance today is the release of the FOMC and FED Funds Rate in the US this evening (UK time) If you are trading intra day my suggested strategy would be small short positions with stops above 0.9550 and entry at 0.9300 or below.

The short term is bearish, the medium term is sideways and the long term is bearish.