The EUR/GBP pair initially tried to rally during the day on Wednesday, but as you can see struggled near the 0.855 level. Because of this, we ended up falling and forming a shooting star which of course is one of the more negative signs. However, I believe that this market is bullish overall, as I have drawn a relatively large upward channel on it, and of course I have the red line at the 0.87 level, an area that had been massively resistive in the past. That should be supportive now, based upon the premise of “market memory.”
I believe that a lot of this is based upon punishing the British pound, which most of the Forex world has been doing recently. I think that the Euro will strengthen by proxy, not so much on its own merits. I think that this pullback will allow people who have missed the breakout to get involved, and start buying yet again.
On the other hand, we could break above the top of the shooting star, which is one of the most bullish signs that you will see. That shows that not only have the resistance been very strong, but the buyers went right back after it and managed to subdue the selling pressure. If that happens, I feel that more and more buyers will enter.
I think that the target is going to be the 0.90 level eventually, but it is can take a while to get there. We are a little bit overextended at the moment, so a slight pullback towards the 0.87 level would make quite a bit of sense. At that point in time, if we can form some type supportive candle or a nice-looking bounce, I’d be more than willing to start buying. That should continue to be the case though, buying on dips going forward. I have no desire to sell this pair at this moment in time.
