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EUR/GBP had a rough couple of days at the end of the week, in order to smash back down through the 0.80 level. While the British certainly have their own problems with the UK economy, they have the luxury of not being stuck in the European common currency. While the rest of Europe languishes under the misfortune of having the one currency for 17 different countries, the British are able to take certain steps in order to alleviate the pressures on their banking system for example.
The breaking of the 0.80 level is a significant move, as it confirms a bearish flag that we had been wanting for quite some time. In fact, it was only the knee-jerk reaction last week that saw this pair rise and back into the body of the various flag. It was after that sudden move, that we have seen nothing but bearishness out of this pair. With this in mind, there's absolutely no reason to think that strength will be returning on the side of the Euro anytime soon.
As for selling, we think that any bounce in this pair is an open invitation to short it from higher levels. The problems in Europe are simply far too complicated for the politicians involved at the moment, and there are many elections coming that could greatly influence the direction that the monetary union takes going forward. With all this doubt, the market will continue to shun the Euro overall, but there will more than likely be little balance of "hopium” from time to time as traders, at least some of them, simply will not give up on the idea of a higher Euro means a better stock market.
In order to consider buying this pair, we would need to see a massive surge higher, perhaps as high as the 0.82 level in order to be completely convinced. Until we get that, there's absolutely no reason for us to consider buying, and will continue to sell rallies on shorter-term time frames such as the hourly or four hour charts as we grind lower going forward.