- The EUR/GBP pair has captured my attention, as market participants continue to see a lot of volatility in this market.
- Ultimately, this is a market that is at extreme lows, and I think that’s part of what’s going on here.
- Quite frankly, the market is just so oversold that sooner or later somebody has to close out their short position.
Furthermore, the market is paying close attention to the idea that the GDP in the United Kingdom came in flat, instead of the anticipated 0.2% month over month. This of course is a bit of a surprise, and therefore I think you will see the British pound continue to take it on the chin, at least in the short term. With that being said, we are still in a massive downtrend and of course there will be quite a bit of resistance to rallying in the short term.
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I think at this point in time, the first thing that traders will be paying close attention to is the 50 Day EMA. This indicator of course is widely followed, and it is just above the candlestick that we are praying for the session. If we can break above the 50 Day EMA, then it’s possible that the market could go looking to the 0.85 level, perhaps even the 0.8530 level, which is roughly where the 200 Day EMA sits.
Underneath, we have the 0.84 level, an area that has been massive support more than once and therefore I think you have to look at it with a certain amount of suspicion as to whether or not we can break down below there. Quite frankly, we would need to see the euro fall apart, and the British pound really start to take off in order for that to happen. I also suspect that it is probably only a matter of time before we get a bigger bounds, especially if we find out that the Bank of England is going to have to start cutting rates aggressively, much like many of the other central banks around the world might be doing.
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