EUR/GBP Forecast June 12, 2017, Technical Analysis

The EUR/GBP pair has had a very volatile day as the UK elections shocked the world by giving back some of the conservative seats in parliament. This gives the markets a lot more to think about, and that being the case quite a bit more uncertainty. As you can see, we gapped much higher at the announcement, pulled back to the 0.8750 level, then shot towards the 0.8850 level, only to pull back again and test the 0.8750 level yet again. In other words, this is a very noisy market, but it looks as if the buyers are to get involved and continue to try to push this market towards the 0.90 level above. This is a market that continues to be the epicenter of expression for currency traders when it comes to the United Kingdom leaving the European Union, but clearly this looks as if the United Kingdom will be a little bit weaker than originally anticipated on the talks of leaving the European Union.
Buying the dips
I believe in buying the dips, but I also recognize of this market is going to be very prone to headline noise. The gap has not been filled, but we have tested the top of the gap several times. This could be one of those rare gaps that doesn’t get filled, so don’t be surprised if we continue to see buyers. Alternately, if we do breakdown below the low of the 2nd candle of the day, we could go filling the gap, meaning that we could drop precipitously. This would probably be in reaction to something positive coming out of the United Kingdom. There are so many moving pieces in this pair right now that it is going to be very difficult to trade in small position sizing will be mandatory.