EUR/GBP Forecast October 19, 2016, Technical Analysis

The EUR/GBP pair fell rather significantly during the day on Tuesday, slicing below the 0.90 level and beyond. It now appears that the market is going to test the 0.89 level below there, which of course is a large, round, psychologically significant handle, but I also recognize that it isn’t a major one. With this being the case, it’s very likely that the market will continue to go a little bit lower and a break down below the 0.89 level should send this market looking for the 0.87 level below, which had been so previously resistive.
Thanks to so-called “market memory”, it’s likely that buyers will return to that area as there should be plenty of volume down there from the previous breakout. At this point in time, it gives the trader’s fuel missed going long previously an opportunity to get involved as well. Quite frankly, you have to look at a pullback at this point in time as offering value, and because even though the Euro itself is very soft, the reality is that the British pound is in much more trouble structurally.
On the other hand, if we break above the top of the candle for the day that only solidifies the idea that we are building up pressure to go higher. That of course could send this market looking for the 0.92 level, and then the 0.95 level after that. The markets still continue to punish the British pound for the exit vote, and as a result it makes quite a bit of sense that we continue to go higher. With that, I don’t really have much in the way of selling fonts at this point, but I do recognize that perhaps short-term traders may take advantage of a move below the 0.89 level. For myself, I tend to follow the longer-term trend anyway, so I think the easier to trade is simply waiting for the market to tell you when it’s time to go long again. With this, be patient but we should get a supportive candle sooner or later.