- In my daily analysis, the EUR/GBP pair is a pair that I have been focusing on a lot lately, not necessarily looking to invest a lot of money to work this market, but it can give you an idea of the relative strength when it comes to the region.
- It’s worth noting that the Euro is extremely low, and it’s essentially a now-or-never situation for the Euro to turn things around against the British Pound.
If the EUR/GBP pair breaks below the 0.82 level, you probably have a 500 point drop just waiting to happen. Furthermore, this chart makes perfect sense given that the interest rate situation in the UK is very similar to that in the US, and the interest rate differential is almost non-existent. Contrast that with the Europeans, who are likely to start cutting rates because of a very weak European economy and, of course, the big political issues we continue to see across the continent. With so many votes of “no confidence” it’s no surprise to see that people might prefer to own the British pound.
Technical Analysis
Technical analysis in this pair is a bit of a 2 speed phenomenon. What I mean by this is that it looks very sideways in the short term, and I think you have to assume that the next few days, if not weeks, are going to be a bit sideways. However, we have been very negative for a while now, and I just don’t know if that will change anytime soon. It’s worth noting that the 50-day EMA sits just below the 0.8325 level, which is an area I consider significant resistance. The 0.8250 level offered significant support and we even ended up forming a small double bottom just below. If we were to break down below, then you’ll really start to see the market break away from this support.
Speaking of splitting, I think that’s exactly what’s happening in this market. I think traders are shorting this market, but they have plenty of prior demand to chew on to finally break things down. If and when that happens, it could be a very nasty fall.
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