- EUR/GBP struggled to sustain early Thursday gains as renewed strength in the British pound weighed on the pair.
- A potential topping pattern and failure at the 50-day EMA point toward a possible move toward £0.87 and even £0.86 if support breaks.
The euro initially tried to rally against the British pound during the trading session on Thursday, but it looks as if the unwinding of negative bets against the British pound continues on Thursday. We initially tried to break above that 50-day EMA, but have given that back, and now it looks like the budget in the United Kingdom has allayed some of the fears that traders had about the British pound, and it is showing up here and many other currency pairs. With that being said, I am looking at a potential breakdown toward the 0.87 level. If we break down below the 0.87 level, I suspect that at that point in time, we make a move down to 0.86 and lower. This does look a lot like a topping pattern, and the sizable candlestick on Wednesday, of course, definitely makes this appear a very probable breakdown.
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Choppy is Normal Here
This market typically is very choppy, to say the least, and as a result, you have to be very cautious, but I also look at this market as one that has been close to a major resistance barrier in the form of 0.89. And as long as we don't break above there, I don't know that the behavior of this pair will have changed drastically from a longer-term standpoint. While I don't necessarily expect a massive shorting opportunity, I do think that overall, we are starting to see a shift in the pattern, and this suggests to me that maybe we have a trend change. It's still early days, but with a little bit of caution, it is a trade that I might be willing to take.
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