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The EUR/GBP pair fell during the Friday session to break the bottom of two hammers. This is a very bearish sign, and suggests that this pair will continue much lower. The fact that it has sold off so viciously over the last couple of weeks without much of a pop definitely signals what kind of bearish momentum that we have in this pair.
Looking at the recent past, we have seen a bearish flag in this pair that broke down just above the 0.80 level. The pole of the bearish flag suggested a move down to the 0.78 level, and there is absolutely nothing on this chart that suggests that this won't happen. It is fairly rare that you see to consecutive hammers form, let alone see them broken down in violated. This is one of the most bearish signals that you can see in the markets, and as such we continue to add to our short positions.
The 0.79 level now should serve as resistance, and we feel that everyone hundred pips or so should produce some type of reaction in this market. However, there are clear signs that the trend is down. If the 0.76 level does give way eventually, this could lead to much, much lower prices. The area around the 0.76 and 0.75 levels is a massive support zone on the monthly chart. The reason this matters is that there is a massive air pocket underneath there that could see a significant acceleration to the downside.
On the upside, we don't see any real reason the buying this market into we break above the 0.81 level as it shows a significant momentum change. Anything below that level should simply be thought of as a bounce in a bearish market. In other words, it should give you an opportunity to sell from higher levels and we would be doing that ourselves every time we get a week candle. We are especially interested in the 0.80 level now, as it should be massive resistance. With all of the problems in the European Union, there have been several large surges of money going into the United Kingdom, and we don't feel that will change anytime soon.