The EUR/GBP pair fell after initially trying to rally on Wednesday, but did find a bit of a bounce at the 0.70 handle. This is an area that has been quite supportive recently, so that isn’t a huge surprise. I feel that it’s only a matter of time before we bounce again and reach back towards the 0.71 level, but that area has been resistive enough that I would be a bit surprised if we broke above there. We most certainly will see resistance at the 0.72 handle above there, so at this point in time I'm not expecting any type of massive move off of any bounce. On the other hand, I don’t necessarily expect this pair to break down easily either. We would need to break down below at least the 0.6950 level, if not the 0.69 level in order to continue the move lower.
Euro Softness
The Euro is soft against almost everything out there right now, so it’s not a surprise that we are soft against the British pound. However, the British pound is not exactly the strongest currency in the world you there, and that of course will keep this pair fairly volatile. With that being the case, I think that short-term trading will have to be the way forward, with perhaps a little bit more favoritism showed towards short positions as longer-term gains seem very unlikely.
The fact that we have so much support below should keep a little bit of a floor in this market, but if we did break down below the 0.6950 level, I think we very easily could find ourselves reaching towards 0.68. Remember, you don’t need massive moves in this pair to make a decent profit as the pip value is larger than other pairs, so while a 50 pip gain doesn’t necessarily sound overly exciting, the truth is it’s more like a 45 pip gain in other markets.
