EUR/GBP continues to fall on Thursday as the pair makes a fresh new recent low. The breaking of the 0.85 level a few weeks ago was a sign of just how poorly this pair was going to behave. The Euro is in serious trouble at the moment, and although the Pound isn’t loved either – it has the advantage of not being the Euro. Because of that, this pair continues to do the same thing most other Euro-related pairs have been doing – selling off the Euro. In fact, the only currency that the Euro seems to have any real traction against is the Hungarian Forint – a currency that is absolutely melting down at the moment.
The breaking below 0.83 is another sign of weakness, and this clears the market to go down to the 0.80 level going forward. However, the pair tends to be choppy and slow moving and you shouldn’t expect meltdowns in this market. The flow of money out of Europe and into the United Kingdom makes sense as there is a large financial sector in the city of London. The flight of capital will go to the closest safe area it can find, and as the Swiss are working against the flow of money into Switzerland, Britain is a perfect match for the needs of so many people.
The most recent technical signal was a bearish flag that ran from 0.8560 to 0.83, suggesting that we could fall 260 pips from the breakdown of the pattern at 0.8340 or so. With this in mind, we expect a move down to 0.8080 at the least. The truth is that charts also seem to be attracted to large numbers as well, and we have been expecting a move to 0.80 before the selling stopped.
This won’t be a move straight down, so we are prepared to sell rallies at this point, and the pair looks like one we simply cannot buy under any circumstances as the fundamentals are so stacked against the Euro. The rallies have offered selling opportunities in the past, and we suspect that is how the near future will play out as well.
EUR/GBP Forecast January 6th, 2012, Technical Analysis
Originally posted here
