EURGBP (Euro / British Pound) is a very technical, highly predictable currency pair, and even though many traders may prefer EURUSD instead, there are times where EURUSD may trade in a flat, dull way, giving a series of false signals and nonsensical breaches of moving averages. In cases such as these, it is wise to quit trading EURUSD for a while, and turn into a currency pair that at that time, may be better, and easier to figure out. EURGBP makes a very good alternative of EURUSD, not that the two markets are correlated, there is absolutely no meaningful correlation pattern that you can practically use, except possibly on very long time frames, which defeats the purpose of trading.
EURGBP is a liquid, clear market, where you are unlikely to encounter prolonged periods of excessive volatility and false moves. It is still hard to predict, but together with EURUSD can make up a very good currency pair portfolio to trade, except that you will have to trade only one pair at the time.
How to Trade EURGBP
When EURUSD doesn’t seem to make sense, and lacks momentum, it is wise to look at EURGBP as an alternative currency pair to trade. There is no clear or meaningful correlation between EURUSD and EURGBP, so don’t try and make trades intended for EURUSD, on EURGBP, that won’t work at all, EURGBP requires its own analysis, and it is possible for these pairs to trade in correlation for few days, and then trade in an unrelated way, or even in negative correlation, so traders need to be careful. But when EURUSD is dull, EURGBP may provide a very clear trend, full of momentum.
Also take into account pip value, a EURUSD pip is worth $10, whereas a EURGBP pip is worth $13.5 at the time of writing this article. This is important to remember for money management purposes, and for knowing in advance how much money a trade may win or lose. But beyond that the road is open and you can enhance your EURUSD trading by switching over to EURGBP when momentum is down.
EURGBP daily chart – This currency pair tends to make clearer, more predictable moves than other pairs. Especially when EURUSD gives off false signals and trades confusingly, EURGBP may provide very clear signals, as is the case on the above chart. EURGBP forms a swing low point, then breaches that point and a downward move occurs.
You may encounter range trading or linear movement in EURGBP, but with enough volatility to do interesting trades. Euro/British Pound offers some very predictable trading from time to time, and at the right time, because usually that is that time when EURUSD is giving too much trouble to traders.
Beyond swing trading theory, traders can also use daily LSS pivot numbers, and chart formation patterns such as flags and channels, these will generally work much better than oscillators such as RSI and MACD. You may find that EURGBP also works with Fibonacci numbers, but it’s more of an illusion that reality, Fibonacci numbers are very popular to use, because that’s what traders demand, and many of them believe in this theory. In practice however Fibonacci numbers do not come up on the charts any more often than other random numbers, so their predictive power is called into question.
It’s better to use swing trading theory and LSS pivot numbers, and possibly Parabolic SAR for all your trading, as these are more realistic indicators. Fibonacci numbers will likely trick you, especially on EURGBP because they can seem to work for many times in a row, but they will fail later on, so it’s best to be avoided.