Potential signal:
- The EUR/GBP pair would be a screaming buy above the 0.8525 level, because it could be a longer-term “buy-and-hold” type of scenario.
- At that point, I would have to have a 100 point stop loss.
- It remains obvious to me that the euro is doing everything it can to recover against the British pound (EUR/GBP currency).
- After all, we have recently made a huge swing low in this pair that has been historically supported, as the 0.84 level is an area that a lot of people will look at on the monthly chart and recognize that it is crucial.
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If we were to break down below the 0.84 level, then it could be disastrous for the euro, but it’s also worth noting that the euro is at least holding its own against the US dollar. As long as the US dollar doesn’t overtake the euro, then it’s likely that the euro will lease standstill against the British pound. However, there are some technical indicators and levels that I will be paying close attention to in order to trade this market.
The Importance of the 0.85 Level
The importance of the 0.85 level cannot be overstated, as it is a large, round, psychologically significant figure, and an area where we have seen a lot of support previously. We also have the 50-Day EMA parked in that area as well, so I think it all comes together to be very difficult to overcome. If we can break above the 0.85 level, the resistance will be truly crushed until we get above the 0.8535 level. At that point, now we are starting to look at the 200-Day EMA near the 0.8550 level. Anything above that becomes very bullish for the euro at this point in time, and I think it could kick off a much longer-term “buy-and-hold” type of scenario.
The interest rate differential favors the British pound just a bit, but it’s not big enough to make it a huge deal. In other words, I think a lot of traders are more than willing to pay the swap on the potential major bounce that we could be in the midst of. Pay attention to the euro and the British pound against the US dollar, because it could make it clear as to which one of these currencies are weaker than the other.
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