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The EUR/GBP pair managed to fall during the session again on Wednesday, only to bounce back and form a fairly impressive looking hammer. This doesn't suggest to us that there is a massive trend change coming, rather a bounce from and oversold condition. We think that this market could very well retest 0.80 level or so, and would be a great sell at this point in time. With this in mind, we have actually close are short positions in this market as we think there will be better selling opportunities above. Obviously, the market could continue lower and if it managed to break the bottom of the session for Wednesday, we think this would be an extraordinarily bearish signal.
However, we all know that there is a certain amount of hope at any given moment when it comes to the Euro, so this bounce shouldn't surprise anyone. We are selling rallies, and fading them off of the shorter-term charts such as the one hour or four hour variety, and especially so at the 0.80 level.