EUR/GBP Forecast for the Week of December 26, 2011, Technical Analysis

EUR/GBP fell during the week and looks very vulnerable in general. This is probably being exaggerated by the flow of capital out of the European Union and back to the United Kingdom as British banks struggle to repatriate their capital out of the damaged EU. The pair did get a bounce on Friday though, and as a result we ended up with a hammer for the weekly candle. The breakdown has been considerable for some time, so we don’t necessarily look at this as a buy signal, rather a sign that the pair should bounce from here. When and if it does, we will be waiting at the 0.85 level to see if former support now offers resistance as dictated by classic technical analysis. We don’t recommend owning the Euro at the moment as the area it represents is the central of the storm for global fears presently.