EUR/GBP Forecast June 28, 2016, Technical Analysis

The EUR/GBP pair rose during the course of the session on Monday, after initially gapping higher. With this being the case, the market looks as if it is ready to continue going higher, at least at this point in time. Pullbacks at this point in time should be buying opportunities as well, as it should represent value in the Euro. The 0.80 level below should be the “floor”, but at this point in time expect quite a bit of volatility regardless what happens as the headlines will continue to push this pair back and forth. After all, the market has to deal with the fact that the British pound is going to be devalued of the short-term, as leaving the European Union should cause some concerns as to the future health of the British economy.
However, we also need to keep in mind that the European Union just lost its second largest member, and that’s going to hurt over the longer term. Also, we have to keep in mind that the European economy has been essentially stagnating for some time now, so at this point in time it’s hard to believe that the Euro should strengthen over the longer term anyway. Also, you have to wonder whether or not there will be fears of political contagion, as several other countries have large parts of the population that are not happy with been in the European Union. In fact, it’s very likely that Great Britain isn’t the only country leaving.
As long as there are plenty of concerns on both sides of the English Channel, I feel that this market will be very erratic, and at this point in time we are simply punishing the British for leaving the European Union. But over the longer term, headlines will move this market back and forth and rather erratic motion, so no matter what we end up doing, it’s going to be violent. In the short-term though, it certainly looks as if the buyers of the Euro have made their statement and it looks as if we are going to reach towards the 0.85 level given enough time. Short-term pullbacks and show signs of support are buying opportunities.
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