EUR/GBP Forecast May 25, 2017, Technical Analysis

The EUR/GBP pair initially fell on Wednesday, but found enough support near the 0.86 handle to turn things around and gain. I think we are going to continue to see buyers come into this market on dips, as it appears that most of the markets are favoring the European Union over the United Kingdom when it comes to the divorce proceedings. This market has been in a nice uptrend for several sessions now, and I don’t see anything changing that. However, I do recognize that the 0.88 level above is very resistive, so it’s likely that we will continue to see sellers in that area. A break above there could send this market to the 0.90 level above.
Brexit talks
Remember that the Brexit conversation continues to dominate headlines, so every once in a while you can expect somebody on one side of the English Channel to say something to upset the apple cart. I think that’s going to continue to be one of the biggest problems training this market, so you need to be able to get out of your position and admit you’re wrong, least for the short-term, rather quickly. I believe in buying dips overall though, and again I believe that we are going to go looking for the 0.88 handle above. Ultimately, these markets will be noisy but it appears that traders are betting on the European Union coming out better than the United Kingdom.
The currencies will have to be repriced, especially after the actual divorce takes place. I think a lot of traders are trying to get ahead of that, as parity could be in the cards over the longer term. Through that prism, I am looking at how the market has been trading lately, and that seems to be the most obvious thesis.