The EUR/GBP pair broke higher during the course of the session on Friday, bouncing off of the all-important 0.7750 support level. The resulting action made the weekly candle a hammer, which of course is a very positive sign. Having said that, I believe that we need to go little bit higher in order to buy the breakout, perhaps above the 0.7875 handle. On the other hand, pullbacks to show signs of support could be bought as well as the support below at the 0.7750 level looks very firm, especially when you look at the size of the bounce from the Friday session.
How be the first to admit that this pair tends to be a bit of a grinder, as smooth moves in this pair are necessarily common. You have to keep in mind that the two economies are completely intertwined as the absolute commerce going back and forth. Because of that, there is naturally a lot of flow across the English Channel, as far as currencies are concerned.
Patience in the short-term outlook
I believe that this pair will go higher, but you are going to need to have a little bit of patience. After all, as I said, the market tends to move in a very choppy manner. However, you have to keep in mind that the PIP value is roughly double, so it doesn’t need to move as far to make profits. Of course, the same thing can be said about losses.
I think if we get the breakout eventually, we will head towards the 0.80 level where we would find plenty of selling opportunities. In the meantime though, this is a short-term set up that I think should be fairly reliable, although don’t get too discouraged if it tends to move in slow motion. That is just the nature of this marketplace if you look at the history. You may have a sudden move in one direction or the other, and then massive grinding and consolidating for long periods of time.
