- The first thing I notice is that the 0.86 level has offered a significant amount of resistance after slamming directly into it.
- The market continues to shoot straight up in the air as traders are running toward the euro and away from the British pound.
We are well above the 50 day EMA, as well as the 200 day EMA indicators. This means that a lot of technical traders will look at this as a market that has completely changed its overall trajectory.
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Longer-term Analysis
The real question is whether or not the 0.84 level ended up being the absolute “floor in the market.” I think that will end up being the case eventually, because quite frankly we have shot straight up in the air, and when you look at the monthly chart, it’s an area that has been crucially important more than once. Short-term pullbacks should be thought of as a potential buying opportunity, with the 200-Day EMA perhaps offering a bit of support near the 0.8540 level. Underneath there, we have the 0.85 level also offering support. As long as we can stay above the 0.85 level, I suspect that the British pound will continue to suffer at the hands of the euro strength (EUR/GBP currency pair).
A lot of what we are seeing comes down to the Federal Reserve and the fact that they may start aggressively cutting rates. If that’s going to be the case, then it makes a lot of sense that we would continue to see the euro do fairly well, because it is considered to be the “anti-dollar.” In that environment, you do get a significant amount of “knock on effect” in this pair, as well the other euro related once. In general, this is a pair that is typically very choppy and noisy, so the fact that we have had 3 very impulsive days to the upside will not go unnoticed by traders around the world. At this point, I think the buyers are definitely starting to flex their muscles.
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