- At this point it looks like the euro is testing a major support level against the British pound in the form of the 0.85 level.
- This is an area that has been important multiple times in the past.
- Going back what seems like a lifetime ago, basically two years though, and I think given enough time, we will continue to see this area be important.
As long as we can stay above the 0.85 level, I would suspect that it could end up being a bit of a buying opportunity, but I also recognize that it could be a very choppy and noisy market.
If we break down…
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If we were to break down below the 0.84 level, then I think it truly opens up the trap door, if you will, to the downside. On the other hand, if we can turn around and break above the 0.8550 level, then we could go looking to the 200 day EMA just underneath the 0.86 level. That would just be a simple rangebound sideways trade. This is typically how this pair moves anyways, so would not be a huge surprise.
More than anything else, you wouldn't even need the market to change its overall attitude too much to benefit from that trade. EUR/GBP is a market that I think given enough time, we'll have to make a bigger decision. So, we need to pay attention to all these levels if and when we finally break out of this range, then we could have a rather big move on our hands.
There is a lot of talk about the Bank of England possibly cutting rates, and the ECB is expected to do it. So, I think at this point in time, it does make a certain amount of sense that we continue to see a bit of a ceiling in this market, and I don't think we take off to the upside very easily. But that doesn't mean that we can't just bounce back and forth.
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