Potential signal:
- I’d be a buyer of this pair above the 0.8550 level, with a stop loss at 0.8490.
- I would be aiming for the 0.8635 level.
The euro has initially fallen during the trading session on Tuesday against the British pound, only to bounce rather significantly and form a hammer during the trading session.
I suspect at this point in time, traders are going to be focusing on the Bank of England and its interest rate decision on Thursday, which is expected to be a 25 basis point cut.
Furthermore, traders will be paying attention to the attitude of the statement and the results of the press conference.
Technical Analysis
The technical analysis for this EUR/GBP pair is starting to show signs of perhaps finding buyers again, and if we do in fact get a fairly negative bias against the British pound, this will be one of the places that naturally benefits. Of course, is a large, round, psychologically significant figure, and an area that’s been important multiple times in the past. However, we need to get above the 0.8550 level to truly take off to the upside, which opens up the door to the 0.8650 level. Breaking above that level, then we see a lot of FOMO trading coming back in the markets.
If we break down below the bottom of the candlestick, then we could go looking to the 200 Day EMA, is right near the 0.8420 level, and rising. That is also an area that I think people will be looking for, if you are short of the market, and a potential buying opportunity if we do in fact reach that level. In general, this is a market that I do think will be interesting going forward, and you also have to keep in mind that the pip size is bigger than most other pairs, so you need to make sure that you calculate your position size correctly.
All things being equal though, I think the most likely scenarios for the next couple of days will be sideways grind, as the Bank of England will obviously have a major influence on where we go next. In the next 24 hours, we may just be hanging around in the short term.
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