The EUR/GBP pair initially tried to rally during the session on Friday but drifted a bit lower. In fact, we broke down below the bottom of the hammer from the Thursday session which of course is a somewhat negative sign, and as a result I believe that this market will continue to go lower. That’s not to say that we’re going to have some type of meltdown, I think we are far from anything like that happening. After all, there is a significant amount of support just below, especially near the 0.70 region. However, this allows us to take a small short position going forward, on a break down below the bottom of the range for the session on Friday as it should show continuation. After all, the overall trend is to the downside so therefore it makes sense that all things being equal we should continue.
Selling short-term rallies
I believe that selling short-term rallies will be the way to go, and on short-term charts. I also believe that selling the breakdown of the range for the Friday session is also good enough, but keep in mind that this pair does tend to be fairly volatile in general. The PIP value is stronger in this particular market, so you don’t necessarily need massive moves to make a reasonable amount of money. We can even go below the 0.70 level, but at this point in time I am not looking to continue the downtrend any farther than we already have. In other words, I think we continue to consolidate and range trade, and considering we are at the top of that range, it’s time to start selling again.
Keep in mind that the British pound has held its own against the US dollar and several other currencies around the world, so it makes sense that it continues to strengthen against the Euro given enough time. I don’t know that the support level will hold ultimately, I just don’t think that were going to get some type of massive break down soon. It’s the wrong time of year to see massive amounts of money flood into the market which is exactly what we would need in order to extend the move lower. With this, I am bearish but I also recognize that this market still remain somewhat tight.
