- The euro is shot straight up in the air during the trading session on Monday, breaking well above the 200-Day EMA against the British pound.
- The British pound seems to be on its back foot at the moment, and of course the euro, although week in general, is not under the same kind of pressure.
- With that being the case, it does make a certain amount of sense that we would see this behavior.
Technical Analysis
It looks as if the 0.8650 level is going to continue to be a major barrier to overcome, and if and when we can, then I think we could start to see more momentum enter this market. Having said that, I don’t necessarily think that this is going to be an easy rally, because we had been so bearish for so long. The market will continue to be very noisy, and therefore I think that even if we do rally from here, it’s very likely that traders will continue to see this through the prism of a market that has a lot of work to do to change the overall attitude.
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Short-term pullback should end up offering buying opportunities, because this type of explosive new action typically means that something is changing. Furthermore, it’s probably worth noting that the 0.85 level underneath is a major area of support on longer-term charts, and therefore I think it does make a lot of sense the people will be trying to buy here where euros are “cheap” in relation to the British pound historically speaking. In fact, if we were to break down below the 0.85 level, something that’s looking increasingly unlikely at the moment, that could be a bit of a disaster for the EUR/GBP market, opening up the possibility of a drop all the way down to the 0.8250 level over the longer term. That is unlikely but is also worth noting that we have seen a little bit of a pullback late in the day, so I also believe that the market might be just a bit stretched. It’ll be interesting to see on a pullback if the 200-Day EMA can hold as support. If we can, that would be a very bullish sign indeed.
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