The Euro rose against the British pound on Tuesday, as the selling may have gotten a bit overdone here. With this, there are a few potential moves that I am watching in this pair.
EUR/GBP
The Euro rose against the British pound during trading on Tuesday as we have reached towards the 0.8550 level. This is an area that's been resistance previously, and now it has shown itself to be so again. If we could break above the 0.8550 level, then it opens up the possibility of a move to the 0.86 level, which was a major support level.
Ultimately, this is a market that continues to see a lot of volatility and choppiness, and quite frankly, most of what we have seen to the downside more or less focused on the idea that the incoming Prime Minister in the United Kingdom was bringing in some cabinet members that would be a little bit more fiscally responsible. That being said, the market has turned around, and it does look like it's trying to overcome that 0.8550 level.
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If it does, then it would not surprise me at all to see this market re-enter the consolidation area we had been in previously, which of course had the floor of 0.86 and the ceiling of 0.8750.
If we fail, then a return to the 0.85 level would not be a huge surprise. Signs of exhaustion probably have people looking to short this pair, as it gives you an opportunity to follow the most recent swing.
The market has seen the British rates over 5% in the 10-year yield for some time, and that is also something to keep in mind: the interest rate differential, so it does favor the downside, but the question at this point is, did we get a little overdone with our selling?
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