The EUR/GBP pair initially tried to rally during the course of the day on Monday, but as you can see pullback in order to form a significant looking shooting star. The shooting star sits just above the 0.78 level, which has been supportive recently. Because of this, the fact that we formed the candle there suggests to me that perhaps we could see this market breakdown at this point, and if we do see a move below the bottom of the hammer from a couple of sessions ago, this market could head down to the 0.75 level.
The Euro continues to suffer at the hands of most other currencies around the world, and of course the British pound isn't any different. However, the British pound has been beat up as well, although it is “less bad” than the Euro. With that being the case, the market looks like it could continue to go lower given enough time, and I believe that it’s only a matter of time before we break down from here.
Rallies will continue to offer selling opportunities.
Ultimately, I believe that every time this pair rallies it will be a selling opportunity. The Euro continues to suffer against most other currencies, as the European Union continues to worry about deflation and the potential the European Central Bank loosening its monetary policy. On top of that, from a technical perspective I believe that the 0.7875 level will continue to offer resistance, thereby giving a bit of a “ceiling” in this market that I can short it from.
It is not until we break above the 0.8050 level and I would even consider buying this market, and needless to say I don’t think that’s going to happen anytime soon. That would take a significant amount of upward pressure in order to accomplish, and because of that I feel that this is going to be a “sell only” market for some time going forward. I will have to reassess the pair when we reach the 0.75 handle in the future.
