During the Monday session, the EUR/GBP pair fell significantly as we finally broke below the bottom of the consolidation area that we have been in for some time. This of course is a very negative sign, and with that it’s more than likely going to continue to go lower from here. With that being said, I am cautiously negative on this pair.
However, I do recognize that there is a significant amount of noise and support below, so I’m not looking for any type of massive meltdown. I believe that there will be significant support at the 0.71 handle, so really at this point in time I look at the market as a short-term selling opportunity at best. I would not hang onto any trade to the downside for any real length of time.
However…
We could get a little bit of support just below and of course get a supportive looking candle. With that, the market would more than likely try to reenter the previous consolidation area, and then of course go as high as the 0.74 level given enough time. It is above there that things change though, as it would signal a longer-term break out to the upside and perhaps a target of 0.75 would be the next move. Either way, it is going to be very difficult to hang onto the trade for any real length of time, because there is a lot of volatility. The volatility of course will keep the market somewhat difficult and dangerous to be involved with, so therefore I am going to be looking for trading opportunities on short-term charts only. I believe that the hourly chart is essentially the best chart to trade off of, and at this point in time I am selling rallies for the next 80 pips or so. On a daily candle that is supportive, I would more than likely change my strategy to start buying on short-term charts as the uptrend that we recently started could continue.
