The EUR/GBP pair broke lower during the session on Friday, as the Euro continues to fall apart. The Euro sol selling across the board during the session on Friday, and this pair of course was no different. With interesting is that we did bounce towards the end of the day in the EUR related pairs. In fact, we ended up forming a hammer in both this pair and the EUR/USD pair, so quite frankly it’s likely that we could see a bit of a bounce. I believe that this market will more than likely bounce to test the recent break down, as the 0.7750 level above was such massive support. Its basic common technical analysis that what was once support needs to be tested for resistance most of the time. This gives the sellers more confidence, as the trend can continue to the downside.
Relative strength
Remember, this isn’t a measure of one currency being so much better than the other one per se, but it simply which one is “less bad” at this point in time as they both are very soft. Ultimately, I think that this market will continue to go little bit lower, and the next large, round, psychologically significant number of courses the 0.75 handle, an area that is important on the longer-term charts as well. However, we have sold off rather drastically over the last several sessions, so it makes sense that we would get a little bit of a reprieve.
The markets will move a little bit slower in this pair than some of the other euro related pairs simply because the tick value is twice as much. Remember, you don’t need to make 50 pips in order to make a sizable gain, as the tick value helps. With that being said, it looks a bit more interesting because you don’t need as much room for the move. On the other hand, if we did break above the 0.7750 level, at that point time I believe that the market would probably start getting bullish again.
