EUR/GBP is somewhat like the “red headed stepchild” of the Forex world. This is a pair that just doesn’t get any respect, which is ironic as it features two of the biggest currencies in the world, and so much interest is being shown in the drama that affects this part of the world. Simply put, this is one of the most important epicenters of the financial crisis at the moment. However, most FX traders simply cannot tell you what this pair is doing at the moment.
The British Pound has seen a bit of resurgence lately, and as a result it has been strong against almost every other currency that it is traded against. This even includes the US dollar, which has been king during the Euro debt crisis. The simple fact is that a lot of money is flowing off of the continent, and into the United Kingdom in a bit of a “safe haven” play. In fact, even the Swiss National Bank has been buying Pounds to protect against Euro losses.
The trend in this pair has been pretty strong as of late, and because of this I think that we may see a bigger move. After all, we are sitting on top of a massive support area, so it only makes sense that we see a bit of a grind at the moment. However, it is hard to imagine a world in which the Euro is suddenly the currency to own, and against the Pound on top of that. This is why I like this pair so much at the moment.
50, 100, and a flag
The action in this pair suggests that a bearish flag is forming. The pair hasn’t broken down below it yet, but if it were to do so – the measured move of the pole would have this pair trading at the 0.76 level. This just happens to coincide with a long-term support level on the longer-term charts. (Funny how hat seems to work out…)
.png "EURGBP Daily 61912")
The 50 day and 100 day EMAs are plotted on the attached chart, and they clearly show the dynamic resistance that he pair is feeling at the moment by trend traders. This pair has massive support in the 0.80 level, but at the end of the day it looks as if it is about to give way. I am selling on a break below the flag and especially if we get a daily close sub-0.80.