EUR/GBP Forecast: Euro Drops Lower Against the British Pound

• The first thing that I recognize is that we are now below the 200-Day EMA, and therefore it’s likely that we will continue to see a little bit of negativity.
• That being said, I do recognize that the 0.85 level underneath is significant support as it is a large, round, psychologically significant figure, and it is of course an area that we have seen a lot of noise in previously.
• Underneath, we also have the 50-Day EMA which of course is a very bullish technical indicator.

This point in time, if we can break above the 200-Day EMA, then it’s likely that the market could go looking to the 0.86 level, which is an area that is a massive amount of resistance just waiting to happen, so I think ultimately if we turn around and show signs of life, the market is likely to continue to see traders take advantage of any momentum. After all, we are in a situation where the market is at extreme low levels, and it’s probably only a matter of time before we see value hunters coming into the market to take advantage of it.

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Volatility Should Continue

The euro of course is all over the place against the British pound (EUR/GBP currency pair), and you should also have to keep in mind that these 2 economies are highly intertwined, despite the fact that there has been Brexit. That being said, the market is likely to see a lot of volatility and noisy behavior, and therefore I think you’ve got a situation where the position sizing should be crucial, and therefore I think it’s a significant issue to pay attention to as far as a risk management is concerned. That being said, the market is at the extreme lows, I think it’s only a matter of time before people will get aggressive at this point in time, and therefore send the market much higher.

The alternate scenario of course is if we break down below the 0.84 level, then the market could really start to fall apart. In that environment, I anticipate that you would see the euro falling against almost everything.

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