EUR/GBP forecast for the week of August 31, 2015, Technical Analysis

The EUR/GBP pair initially rose during the course of the week, and even tested the 0.7 for resistance barrier that has been extraordinarily strong over the last several months. Upon reaching that area, the sellers came back into the marketplace, and pushed the Euro lower. The end result was a shooting star, which of course is a very negative candle. However, we recognize that over the course of the last six months or so, we have seen quite a bit of consolidation and it has been very reliable. Because of this, we are not looking for some type of meltdown, which is simply a return to the bottom of the consolidation area yet again.

We see the bottom of that consolidation area has been the 0.70 level, which of course is a naturally large, round, psychologically significant number. This of course will attract large money, and therefore probably send the buyers back into this marketplace. With that in mind though, we still have plenty of downward momentum overall, and more than enough room to make a profit. On a break below the bottom of the candle, we feel that the sellers will take advantage of this move yet again, and simply start selling the Euro overall.

While both of these currencies struggled against the US dollar the course of the last week, the truth is that a lot of the real concern lies within the European Union. It isn’t exactly like the United Kingdom is massively strong at the moment, but the reality is that the European Union has a lot of longer-term structural problems, and as a result it’s difficult to imagine the British pound losing any serious strength against the Euro, at least for the time being.

However, there is also the possibility that we finally break higher. If we did, we would be willing to go ahead and buy if we got above the 0.75 handle. That being the case, we would have to go ahead and recognize strength for what it is. But at the end of the day, we find that to be very unlikely to happen.