The EUR/GBP pair fell during the session on Friday, but as you can see got enough of a bounce off of the 0.8450 level in order to form a nice looking hammer. This hammer is at the top of a significant amount of noise going all the way down to the 0.8350 level, so I do feel that this market more than likely will bounce from here. A break of the top of this candle is a classic technical analysis signal to start buying, and although I think that will more than likely be the case, I would not be hanging onto any trade in this market for far too long. After all, this is a classic range bound market, and it does tend to stay that way for long periods of time.
At the moment, I see the resistance that matters the most being the 0.86 handle, while the most important support level is roughly 0.84 or so. That being the case, it would not surprise me to find myself buying this market on a break of the top of the hammer from the Friday session, and hanging on for about 50 pips. I don't expect much more than that out of this market or this trade, but remember that the pip value in this pair is higher than most other ones.
Interconnected economies lead to choppy markets
Remember that both the European Union and the United Kingdom are highly interconnected as far as economic action, and as a result this pair does tend to be very choppy over the long-term. With that being the case, it would not surprise me at all to stay in this 200 pip range for the longer-term, and as a result I feel this is a short-term traders market only. Right now though, it does look like it is going to favor the buyers, so therefore I am more or less in a "buy only mode." Selling really can't be done until we break down through the 0.8350 handle, or some type resistance near the 0.86 handle.
