The EUR/GBP pair rallied for most of the session on Wednesday, as the bank of England took a much softer stance on monetary policy then people would have expected. However, no further quantitative easing was suggested beyond the usual fare, and as a result the Pound would have lost ground against most currencies, but did remained some type of firmness in the end. This was especially true in this particular pair, as you can see half of the gains were given back.
The fact that we formed a shooting star of course is very bearish, but we don't necessarily have a market that's about to collapse in my opinion. In fact, I believe it simply going to return to the consolidation area that we've seen for the last two months. This consolidation area is essentially 0.84 to the 0.87 level. I have to redlines on the chart at 0.85 and 0.84, which is an attempt to outline the region of support that we have down there. It is because of this that I feel that any pullback will simply be consolidated, and not some type of massive meltdown.
Consolidation or move higher
The alternate scenario to the consolidation of course is whether or not we could move higher. For example, if we managed to move above the top of the shooting star, this will course would be bullish enough for me to start buying again. If that's the case, there is very little in this marketplace that stands in the way of the 0.90 handle. After all, the British pound is getting absolutely pummeled against most currencies, and although the Euro is a bit soft at the moment, it's not been sold off hand over fist.
With all this being said, I firmly believe that we will eventually go higher and it's not a proposition of "if", but "when." With all that being said, I believe that a pullback is simply going to be a buying opportunity, and any supportive candle between here and 0.84 will be enough to get me going long. Otherwise, a break higher would have me aggressively long.