EUR/GBP Forecast October 4, 2017, Technical Analysis

The EUR/GBP pair initially went sideways on Tuesday but found enough support at the 24-hour exponential moving average to turn around and rally significantly. The market is now looking towards the 0.89 level above, which of course is a certain amount of psychological resistance due to the round number. Given enough time though, I think we continue to go above there and then start looking towards the 0.90 level above. I believe the pullbacks will find support down to the 0.88 level underneath, which of course is previous support and resistance. I think that the market continues to see volatility, but with an upward slant. After all, the longer-term attitude of the market is bullish, and even though we have seen quite a bit of selling pressure, ultimately the market looks likely to continue the longer-term attitude as there are a lot of concerns for the economy in the United Kingdom after leaving the European Union.
Human psychology
I believe that human psychology is the biggest thing to pay attention to in this market, as traders will be much more comfortable with the idea of the European Union than the separated United Kingdom. It’s not that anybody anticipates that the United Kingdom will fall apart, just that there are a lot of unknowns when it comes to the UK, and that by its very definition means that money is much more countable in the EU. However, I also recognize that there is an interest rate hike coming out of the Bank of England, and that continues to put downward pressure in this market. I think we will continue to see a lot of noise in this market, but ultimately, I think that the idea of safety on the continent will continue to propel us higher.