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- In my daily analysis, the EUR/GBP pair is one that I've been focusing on a lot lately, not necessarily that I am looking to put a lot of money to work in this market, but it can give you an idea about relative strength when it comes to the region.
- It's worth noting that the euro is an extraordinarily low levels, and it's essentially a“now or never” type of situation for the euro turn things around against the British pound.
If the EUR/GBP pair were to break down below the 0.82 level, you probably have a 500 point drop just waiting to happen. Furthermore, this chart makes complete sense considering that the interest rate situation in the United Kingdom is very similar to the US, and the interest rate differential is almost nonexistent. Contrast that with the Europeans, which are likely to start cutting rates due to the very weak European economy and of course the major political issues that we continue to see all across the continent. With so many“no-confidence” votes out there, it's not a surprise to see that people might prefer to own the British pound.
Top Forex Brokers1 Get Started 74% of retail CFD accounts lose money Technical Analysis
The technical analysis in this pair is a bit of a 2 speed phenomenon. What I mean by this is that in the short term, it looks very sideways, and I think you have to assume that the next couple of days, if not weeks, kind of being somewhat sideways. However, we have been very negative for some time, and I just don't know if that will change anytime soon. It's worth noting that the 50 Day EMA sits just below the 0.8325 level, an area that I look at as significant resistance. The 0.8250 level has offered significant support, and we even ended up forming a little bit of a double bottom just below there. If we were to break down below there, then you really start to see the market chip away at this support.
EURUSD Chart by TradingView
Speaking of chipping away, I think that's exactly what's going on in this market. I think traders are shorting this market but have a lot of previous demand to chew through in order to finally break things down. If and when this happens, it could be a very nasty drop.
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