The Euro has been choppy against the British Pound on Tuesday, as we are sitting just above a massive support region.
EUR/GBP
The Euro has been very noisy against the British pound during the trading session on Tuesday, as we are now facing a pretty significant support level in the form of 0.86.
The 0.86 level has been important for several months now, and the reaction that we had during the trading session suggests that perhaps we are going to continue to see a lot of noisy action, perhaps even a bit of a significant bounce from here.
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I do believe that it is probably only a matter of time before we re-enter the previous consolidation range, opening up the possibility of a move toward the 200-day EMA. With that, I like the idea of buying in this general vicinity, but if we were to break down below the crucial 0.86 level, then you'd have to think that maybe we are in some trouble as far as the Euro is concerned.
Analyzing Potential Support and Economic Outlooks
Over the longer term, I believe this is a market that will do everything it can to try to stay within the range between 0.86 on the bottom and 0.87 on the top. The market is currently arguing over the idea of whether or not the British pound will continue to see overall strength or if we have a scenario where the Euro gets a bit of a reprieve.
Ultimately, this EUR/GBP market remains very noisy, but that is typical for this currency pair. After all, they tend to have a lot of the same economic outlook despite the fact that the Bank of England is quite a bit more hawkish than the ECB at the moment.
The ECB just raised rates, but they made it pretty clear that they thought the economy was sluggish and that the interest rate hike was more or less due to inflation. Range-bound traders will continue to love this pair, and that is its typical behavior anyway, so that doesn't surprise me in the least. I'm cautiously optimistic.
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