EUR/GBP Price Forecast January 4, 2017, Technical Analysis

The EUR/GBP pair continues to go back and forth, as we initially fell during the trading session on Wednesday, but bounced enough to form what is looking very much like a daily hammer. I think that the market should continue to go back and forth overall, as the 0.88 level underneath is the “floor” in the market, while the 0.90 level above is the “ceiling.” Because of that, I think that the market will continue to go back and forth, and I think that the longer-term attitude of the market is more than likely to the upside, especially considering that we are negotiating a divorce between the United Kingdom and the European Union, which should favor the European Union longer-term as it is a larger trading block, and of course a bit more certain in the future than the unknowns coming out of London.

Ultimately, I think that longer-term traders will be aiming for the 0.93 level above, which was the recent highs. I think that we will struggle to get above there, at least in the short term. Longer-term, we could be looking at parity but that is months down the road, if not years. On the other hand, if we break down below the 0.875 level, we could drop down to the 0.86 handle, and perhaps even the 0.84 level. With this type of potential volatility, this could be the pair to pay attention to this year, especially after the negotiations are finished. I favor the upside but recognize it is going to be difficult.

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