- Monday was very kind to the euro, as we rallied somewhat significantly during the early hours of the trading session.
- The question now is whether or not we can fill the gap from last week after the surprise announcement of snap elections in France.
- I think the entirety of the trend and market overall behavior is going to hang on the idea of the 0.85 level being so crucially important.
If we can see this market rally above there and continue to go higher, I think at that point in time it would be extraordinarily bullish for the euro against the pound at least.
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Noisy Pair Because of Ambivalence
I think both of these currencies are going to play a bit of a backseat role to the US dollar going forward, especially as the Federal Reserve continues to remain stubbornly tight with its monetary policy. However, EUR/GBP is a pair that does tend to trend for long periods of time, and we did just touch a very low level in this pair. It'll be interesting to see how this plays out. I do believe that longer term traders are looking at this through the prism of the Euro being cheap against the British pound and that might be reason enough for buyers to step in.
The 0.84 level offering support is not a huge surprise. It's an area that's been important previously so that leads traders to believe that it will be again and so far, that has held true. If we were to break down below the 0.84 level, it's very possible we could drop another 100 points but right now it certainly looks as if there's a lot of fight in the euro at these extraordinarily low levels.
At this point in time, it certainly looks like a bounce would be likely, but whether or not it’s something that we can hang onto remains to be seen. The pair does tend to be noisy under the best of circumstances, but for longer-term traders, it does offer nice “buy-and-hold” or “sell and hold” opportunities. I think we might be trying to do everything we can to set up another one.