EUR/GBP breaks back below the 0.88 level

The EUR/GBP pair initially tried to rally during the day on Monday but found enough resistance above to roll over and break back below the 0.88 level. By doing so, I think we will probably continue to go a bit lower, perhaps trying to find more support near the 0.8750 handle. I suspect that it is only a matter of time before the buyers get involved, based upon the impulsive move that we have recently seen. The alternate scenario of course is that we turn around and break to the upside again, and make a fresh, new high.

If we do make a fresh, new high again, that would be a very bullish sign, as it would show a continuation of the buying pressure. I think that the market would then go looking towards the 0.8850 level above, which has been resistance in the past. I think that we will continue to see this market go back and forth and test every 50 pips or so, and I think that the fact that this market is going to be so headline driven due to the negotiations going on between the UK and EU makes perfect sense for these short-term technical moves.

I think that the market will eventually find reason to go higher, as we have seen resiliency in the market more than once recently, and ultimately, I think a lot of this is going to come down to how each currency performs against the US dollar, which is the benchmark of relative strength. Because of this, pay attention to the USD versus both currencies.