The EUR/GBP rallied a bit during the trading session on Friday but continues to struggle with the idea of breaking above the 0.8750 level, which extends resistance all the way to the 0.88 level. The fact that we ended up forming a bit of a shooting star suggests to me that the Euro is losing some of its momenta, even though it shot straight up in the air during the trading session on Thursday.
The fact that we ended up forming a shooting star gives credence to the idea that we may just simply consolidate yet again, with the 0.8550 level underneath being a significant support level. It’s also worth noting that the 200-Day EMA is sitting just above there, so it does make a certain amount of sense. However, keep in mind that these 2 economies are each other’s number one trading partners, so a lot of the currency moves that you see are done out of necessity, not necessarily speculation.
Watch this Pair
- However, even if you don’t trade this pair, it’s important to watch it.
- This is because it can give you an idea of which currency is stronger because the pair can be used to extrapolate information into some of the major currency pairs like the EUR/USD and the GBP/USD.
- In this example, if the EUR/GBP pair starts to fall again, and the US dollar starts to strengthen, then it stands to reason that the EUR/USD pair should fall further than the GBP/USD pair, in a process known as “triangulation.”
On the other hand, if this market takes off and breaks above the 0.88 level, then I would not be interested in shorting the Euro against anything. In that scenario, even if the US dollar were to rally, at that point you would be looking to short the British pound against the greenback. Either way, I suspect that this pair itself ends up carving out a range, which is something that it likes to do in general. The pair is quite often noisy, to say the least, I think at this point it is a situation where you are trying to figure out where you are going longer-term, but this is a short-term type of trading market. As things stand right now, looks like we’re heading right back into that type of behavior.
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