EUR/GBP has been falling for some time, but recently has seen a bit of a bounce. The most recent action has been a bit of a grind higher, and as such it has taken a back seat in my order of preference as I prefer an easy and obvious trade. However, the action I have seen over the last two days has caught my attention in this pair again.
The pair looks as if it is trying to do one of two things. The first possibility is a grind higher in an up channel. This can be seen by the higher highs over the last couple of weeks, and this could give the bulls a bit of a boost psychologically as the Euro has been so beat down against the Pound and other currencies.
Another distinct possibility is that it is forming a bearish flag. This would actually make sense as the downtrend had been so strong. Also, there is a lot more going on against the Euro than the Pound. Granted, the United Kingdom has its own issues, but there isn’t exactly a concern of Yorkshire breaking away in a debt-fueled mess like we see in Greece.
0.81 And 0.80
The recent action has seen a bit of a consolidation in between the 0.81 and 0.80 handles. This pair likes to grind slowly at times, and as a result this isn’t much of a surprise to me. The pair looks like it wants to fall again, but the 0.80 level below is actually a long term support and resistance level going back years and a bit of an equilibrium in this market to boot. This makes the area that we are trading in very important, and as a result a breakdown from here could quickly turn this pair into a long term sell waiting to happen. On a daily close below the 0.7950 level has been shorting aggressively as I think 0.75 would be the next stop. As for buying, I can’t do it as there are simply far too many headline risks in Europe at the moment.
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