The EUR/GBP pair initially rallied during the session on Tuesday, but as you can see pullback at the 0.75 zero level in order to form a shooting star. The shooting star of course is one of the most negative candle formations that you can get, and as a result a lot of sellers will more than likely step into the marketplace. On top of that, the trend has been lower lately, so it would make sense we would continue to go lower from here and head to the 0.7750 level. That being the case, I feel perfectly comfortable selling this market on a break below the bottom of the range for the session.
On the other hand, we could break the top of the shooting star, and that of course would be a bullish sign. I think under those circumstances, this pair probably goes to the 0.7950 level, which of course is the top of the consolidation area that we have been in recently. Regardless, I don’t think that this pair can go above the 0.8050 level anytime soon.
Euro is oversold, but not necessarily in this market.
I think that the Euro is oversold in general, but not necessarily in this market. I think that we will more than likely continue to fall but I recognize that in order to get below the 0.7750 level, it will take a bit of momentum building. The EUR/USD pair is sitting on significant support on the longer-term charts, so I think that it’s only a matter of time before it bounces, but that doesn’t mean that the euro will outperform the British pound, which is of course what this particular pair measures.
I believe in the short-term though, we have an easier way down and up, so that is the trade I prefer. I recognize the nonfarm payroll is Friday, so that of course will keep the market somewhat quiet, so I’m only aiming for return to the recent lows, and not any type of meltdown on the break lower over the course of several sessions.
