EUR/GBP is a pair that a lot of traders I know ignore. It is truly too bad in my opinion as it is most certainly a match of two of the world’s major currencies. The pair is often overlooked in my estimation because of the fact that the average daily move is quite often only 30 or 40 pips. However, the pair has a larger pip value, so in the end this works out in much the same way as many other pairs.
The pair features two economies that are very interdependent of each other. The European Union is the destination for 40% of the United Kingdom’s exports after all. As this is the case, it makes sense that the two currencies will move in a fairly grinding fashion much of the time. If for example, the European Union is struggling (Hard to imagine I know!) it lends to be that the export sector in Britain suffers.
The opposite can be true as well. None the less, in the current environment we have a very weak and concerning Europe, and this will bring down the value of the Euro in general. The negativity will hurt Britain too, but the UK is certainly a much “safer” place at the moment than Europe, and as a result we will see the Euro continue to fall against the Pound.
0.80 is gone
The 0.80 level was one that I have been watching for a potential target over the last couple of weeks. However, this level is now in the rear view mirror, and it appears that we could go much lower if the daily close at the bottom of the range for Monday is any indication.
With the action lately, this pair looks to fall even further. Can it bounce from here? Of course it can, but the reality is that we are in a strong downtrend, and the issues in Europe aren’t going anywhere soon. I truly believe this pair goes much lower over the summer.
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I am still short of this pair, and would be comfortable adding every time we break down another handle, or hundred pips. I would also be comfortable to sell rallies as well, especially ones that fail at the handle marks as well, such as the 0.80 level. I will not buy this pair that the moment.