The Euro initially rose again on Friday but continues to see problems with holding onto gains at the moment.
The Euro initially rallied a bit against the British Pound during early trading on Friday, but has since given back some of the gains. The 0.87 level above I do believe offers short-term resistance, and I will be watching to see if we break above it or perhaps fail from there.
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Really, at this point in time, I think you have a situation where sellers continue to pile into this market, which makes a lot of sense when you think about the two central banks involved. After all, the ECB is basically steady with inflation being where it needs to be in places like Germany.
Central Bank Divergence
But at the same time, the Bank of England, although it has recently cut, has to worry about sticky inflation, a lot like the Federal Reserve. It may take its time cutting rates, and therefore I think eventually you see this thing rollover.
We are sitting just above the crucial 200-day EMA at the 0.8650 level. So, if we were to break down below there, I think that would rush in the next wave of selling down to the 0.86 level and then eventually 0.8450. This would more likely be a situation where it isn’t necessarily pound strength, but euro weakness as far as I can tell.
If we were to break to the upside, it is really not until we clear 0.8750 that I feel bullish about this market. I think this is a downtrend waiting to happen. And if you need any more confirmation, just look at how these two currencies perform against the US Dollar. It is most certainly a better time for the British Pound at the moment, and I think that plays out here as well.
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