The EUR/GBP pair is the one that I get the most questions about from newer traders. They fail to understand that the pair is this choppy, and why it would be. After all, both of these currencies are major currencies, and widely traded. However, what they do not understand is that the two economies are so intermingled. And this is exactly what leads to the choppiness we all know and hate in this market.
However, there are times where this pair becomes an obvious buy or an obvious sell. We are not quite there yet, but I do think that we are heading towards that general vicinity. Somewhere between the 0.8450 level, and the 0.85 level, I believe that there is a significant amount of support that will let this market back up. That being the case, I think we are heading towards a nice buying area as soon as we can get some type of support.
The candles don't tell that story yet
Unfortunately, the candle action does not tell that story yet. In fact, the Friday session pointed towards even lower prices as we formed a shooting star. Granted, it is a shooting star shaped candle within the range of the previous one, so of course it doesn't carry that much weight. But what it does tell me is that there is probably going to be continued weakness in this market, at least the next 24 hours. Because of that, I'm simply going to sit back and wait and see what this market does over the next couple of days.
However, I would be more than willing to buy a supportive candle down there, simply because there is such a great risk to reward ratio. On top of that, it looks like the Euro is about to breakout against the Dollar, which always has a major influence on this pair. That being said, I think that the 0.86 level will offer little bit of resistance, but in the end we sliced through a couple times and that generally makes it less important to the market going forward.