By FXEmpire.com
The EUR/GBP pair is a great barometer of Euro and Pound strength, as it completely avoids the noise associated with adding the US dollar to the mix. While many traders will quote the Euro in Dollar terms – and they probably should – most don’t bother to look at this pair, and that can be a big mistake.
For example, the Wednesday session had the Euro and Pound both gaining marginally against the Dollar. However, in the EUR/GBP pair, we can see the Euro tried to rally but only failed. This is especially significant as the UK officially entered a recession during the session with a negative GDP number. However, in the end it doesn’t matter as the problems in the European Union continue to cause much more concern that a recession in the United Kingdom.
The candle for the session ended up being a shooting star at the bottom of the most recent downtrend, and this is a weak signal in our opinion. We like this formation because it signals that there was an attempt to rally – but it completely failed. You will also have to notice that the top of the shooting star failed right at the start of the first area of clusters, and therefore shows there was no real conviction by the buyers. In this sense, this is a very obvious and ominous signs for the market in our opinion.
With this being said, the 0.8150 level seems to be the support level that the market is trying to break below. With the recent action, it is hard to think that it isn’t just a matter of time, and that the market wants to continue towards our 0.80 target going forward. The breaking of the bottom of the Wednesday session lows would signal a quickening of the sell orders, and should see this market falling even further. It is that move that we are going to use in order to start selling this pair. As for the upside, it must be said that a break of the top of the Wednesday session candle would be a bullish sign. However, it would also be countertrend, and as such we still prefer selling in general.
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Originally posted here