By FX Empire.com
The EUR/GBP isn’t one market that traders who are looking for excitement typically trade. It has a long history of being a slow grinder, and sudden moves aren’t all that common. They do happen, but typically it is a result of some kind of shock to the system.
The problems in Europe certainly have a detrimental effect on both currencies, and as such this pair will more than likely continue to be choppy in the near term. However, the last month has seen a very tight range that will more than likely give way to a larger move as the 100 pip range cannot continue forever. The 0.84 level has obviously been very resistive in the recent past, and the 0.83 is starting to flex its muscles as well. This cannot continue forever.
The currencies are heavily intertwined, and as a result – anything that sinks Europe will eventually sink Britain. The UK sends over 40% of its exports to the European Union, and if that area is in a massive recession, there is a real chance that the problems cause the UK massive economic headaches. Also, the British banks are highly exposed to what goes on in the EU. The debt being held in London isn’t necessarily as safe as people would want to think, and because of this – what happens across the Channel will continue to put a bit of a damper on the Pound as a whole.
However, the Euro will be hit harder by bad news, and as such this pair should continue to fall overall. The trend is most certainly down, and as a result we prefer to sell anyway. The breaking of 0.83 becomes our signal to sell, and we would like to see at least a daily close below that area in which to take that trade. If the market closes on a daily chart above 0.84, we see that the 0.85 above is even more resistive, so we wouldn’t bother going long on that move. The Euro will more than likely put up a fight form time to time, but the reality is that Europe is in trouble for some time to come.
EUR/GBP Forecast for the Week of February 20, 2012, Technical Analysis
Originally posted here
