Euro rallies against Sterling during the week

The EUR/GBP pair initially fell during the week but turned around to form a hammer for the second week in a row, which of course is a very bullish sign. We have been bouncing around for some time, and I think we may go looking towards the 0.90 level again. This is a market that is reacting to a lot of crosscurrents when it comes to negotiations between London and Brussels, and of course statements coming out of both London and the ECB.

Recently, both have suggested that lower interest rates are going to be the case going forward, with the biggest surprise coming out of London. However, I think that the overall uptrend should continue, in a very choppy and well-defined manner. I don’t think we break above the 0.90 level though, as we continue to see the market go back and forth. I like the idea of trading this market in a range bound manner, perhaps using shorter time frames than the weekly chart. Buying dips could be a way to play as well, and the 0.86 level underneath should be a bit of a “floor” over the longer term. If we did breakdown below that level, then I think we could go to the 0.83 level, but we have not done that yet, and recently we have seen it show signs of resiliency. Expect a lot of choppy behavior, so I would be cautious about putting too much of my account into this market.