Potential signal:
- I am buying dips here.
- I would love to see the 0.8790 level hit, where I would buy.
- I would have a stop at 0.8745 and a target of 0.8880
The euro broke higher against the British pound, surpassing 0.8825 resistance and confirming bullish momentum. Short-term pullbacks toward 0.8750 should attract buyers, with 0.89 as the next upside target amid expectations of eventual Bank of England rate cuts.
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The euro has broken higher during the trading session here on Wednesday against the British pound to clear the 0.8825 region, an area that had been very difficult to get above. That being said, we have also seen a little bit of pushback. So, while I do think this is a very positive pair, I recognize that there is more of a grind ahead and less of a shot straight up in the air.
This Pair is Quiet Most of the Time
That’s the typical behavior for this pair, so that doesn’t surprise me at all. Keep in mind that the British pound has been weak against multiple currencies, and I think at this juncture, you have to look at this through the prism of the Bank of England. Although not cutting rates this past meeting, it got very close to doing so. That suggests that eventually the Bank of England will cut rates and therefore the market will try to front-run the differential.
At this point in time, one of the most important levels on the chart is the 0.8750 level, which is an area that previously had been important resistance. It should now offer support based on market memory. And with that being the case, I think short-term pullbacks probably get bought anywhere near that area. It’s worth noting that the 50-day EMA sits about 25 pips underneath there, so I think it’s backed up quite nicely by buyers.
The market between 0.86 and 0.8750 had seen a lot of noise, and the measured move is for the 0.89 level, which is my target. That’s an area that’s been important multiple times in the past, so it makes sense that perhaps we’re just trying to find our way back there. Short-term pullbacks should end up offering nice buying opportunities in a market that is obviously bullish.
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