The EUR/GBP pair had a horrendous day on Tuesday. The Euro continues to be the punching bag for the markets, and this pair was weak enough to close on the very lows – never a healthy sign for the bulls. The trend has been down, and the gap from a couple of weekends ago has been filled, making me very interested in selling the pair.
The situation in Europe is well-known as toxic and cloudy at best. Because of this, there must certainly be a lot of money flowing out of places like Greece and France into the United Kingdom. With the promise of higher taxes, a lot of the ultra-wealthy are sending money out of France, and the UK is a perfect spot.
The United Kingdom isn’t without its own problems either, but the biggest plus for it is the fact that it isn’t the continent. The failure to adopt the Euro certainly looks like a stroke of genius now I am sure. The Danes and Swiss probably feel the same way about now as well I would suspect.
Hanging Man
The hammer that formed on Monday suggested that we could see a breakout above the 0.81 level. The area was the top of a weekend gap from a couple of weeks ago, and as a result it certainly would have been on a lot of trader’s radars. The fact that the bottom of the hammer has been smashed though makes the hammer a hanging man now, and this is one of the most bearish signals out there. With this in mind, a run back down to the 0.80 level seems very likely.
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However, the market has already broken through that area once before and as a result it could travel even farther this time. 0.78 looks like a promising target as well now, based upon the longer term history of this pair. I am selling this pair as I write this piece, and will continue to do so on rallies and a daily close to new lows, below the lows form last week.