The EUR/GBP pair rose during the course of the session on Friday, breaking higher and heading to the 0.80 level. This is an area of significant resistance as far as I can see, and as a result I think that buying here is going to be difficult as the market has a significant amount of resistance all the way to the 0.8050 level. We get above there though, and I think all bets are off as the downtrend could be in serious trouble at that point in time.
We are at a decent point of inflection and far as I can see, so I’m watching this for the next couple of days as I think we will make some type of decision in this area. A resistive candle between here and the 0.8050 level of course is very negative and could continue the downtrend, but the weekly candle of course is a hammer, and that is very positive. It’s a conflicting signal, but it is one that I have to pay attention to simply because weekly hammers tend to mean things.
Patience will pay off in this pair.
I believe that if you’re careful and wait some time to make a decision, you could profit quite nicely off of this potential move. After all, a break down from here should lead to the 0.7750 level, and then possibly the 0.75 handle which is a much more important support level on the longer-term charts. It’s also a large, round, psychologically significant number, so of course it makes sense that the market would be attracted to it.
On the other hand, if we break above the 0.8050 level, I think that we could very easily go to the 0.8150 level as it is the next “cluster.” At that level, I would expect to see quite a bit of selling pressure, but ultimately I think if we reach their we could probably pull back and start buying again. I think that could in fact be a trend changer, as the market will certainly have lost downward momentum at that point.
