The EUR/GBP pair gapped lower at the open on Monday, and tested the 0.7950 level. With that, I feel that this market should continue the downtrend that we have seen, as we have had a decent bounce so far over the last couple of weeks. No market moves in one direction forever, but this market has been fairly close to it. With that, I believe that the trouble with the Euro should continue, and as a result I would start selling this market again below the 0.7950 handle. At that point in time, the market should then aim for the 0.79 level, and then possibly break down from there.
The British pound did show a little bit of strength during the day, so it makes sense that this pair fell. I think that this market will continue down to the 0.7750 level eventually, and then possibly even as low as the 0.75 handle if this selling can continue. That’s the big rub though, as this general vicinity is so significant as far support is concerned on the longer-term charts. With that being the case, we could have a bit of a fight on her hands.
Point of decision.
If we make a break from here to the downside, I think that the move to the aforementioned support levels could be rather quick. On the other hand, I’m not going to ignore if we get some type of nice bullish candle, or perhaps more importantly a break above the 0.8035 level. Above there, all of a sudden we have broken a weekly hammer, which would be a very positive sign and a potential “buy-and-hold” long-term type of trade where we could make some real money. The biggest problem of course is that the Euro is in so much trouble it’s really difficult to imagine that.
With that being said, I am cognizant of the longer-term charts but it certainly looks like over the next couple of sessions we should see the sellers return and the downside win out the argument. The real question of course is going to be what happens with the longer-term charts?