EUR/GBP Forecast October 26, 2017, Technical Analysis

The EUR/GBP pair went sideways initially on Wednesday, but then fell significantly as the British pound gain strength around the world. This was due to stronger than anticipated CPI figures coming out of London, and money flowing into the British currency due to anticipations of interest rate hikes. I think that the 0.88 level underneath is a massive “floor” in the market that continues to hold the uptrend higher. However, the weekly charts have formed a couple of shooting stars recently, and that of course suggests that we may test the 0.88 handle. If we were to break down below it, the market probably goes looking towards the 0.86 level above, which leads to the 0.85 level.
The alternate scenario of course is that we rally and go looking towards the 0.90 level above, which has been resistive. I think we will probably see more consolidation than anything else, and with this being the case, it’s likely that short-term back and forth treating is probably going to continue to be the best way to handle this market unless of course you have the ability to hang onto a lot of volatility for a longer-term move. If we were to break significantly above the 0.90 level, the market probably goes looking towards the 0.92 level after that. There is a lot of noise in the marketplace, but that makes sense considering the uncertainty of the British future as they are poised to leave the European Union. The market seems to be hanging on the words of politicians on both sides of the English Channel, so that of course is going to make this difficult. Small position sizes will be necessary for the near future, as we don’t have clarity quite yet. I think that due to the unknown nature of the British economy down the road, it’s likely the buyers will return, but that’s just a thesis at this point.