- The Euro has bounced slightly against the British pound during the trading session on Wednesday, as we continue to pay close attention to the 0.85 level.
- This is a market that I think will continue to be very noisy, and it's probably worth noting that the 0.85 level has been crucial multiple times in the past.
Because of this, I think you have to look at it through the prism of a market that is trying everything it can to hang on to overall support. Zooming out, you can see that the 0.85 level has been crucial going back to at least the middle of 2022, but there's been multiple times in the past that it has also caused a lot of attention.
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Even with support there are still concerns
That being said, there does seem to be a lot of resistance just above that you will have to deal with, not the least of which will be the 0.8525 level. If we can break above there, then I think you have a real shot at this market recovering. In that environment, we would more likely than not go looking to the 50-day EMA, and then eventually the 200-day EMA after that, which sits just below the crucial 0.86 level, which is the top of the consolidation area.
If we break down below the bottom of the candlestick for the trading session on Wednesday, we could see this market drop another 100 pips. Keep in mind that the position sizing in this pair is a little bit different. The pip value is higher, so you need to be cautious about that, but recognize that we are at a major inflection point that a lot of people will be paying close attention to.
At this point, we could be setting the table for the next major move, and therefore we need to pay close attention to how this is resolved. Over the longer term, I would anticipate a bounce, but we also have to keep in mind that the European Central Bank is very likely to cut rates so that of course has caused a lot of concerns when it comes to holding the euro.
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