The EUR/GBP pair went sideways initially during the day on Wednesday, but found enough support at the 0.89 level to turn around and rally a bit. I think that longer-term, this market will probably continue to do reasonably well, but I also recognize that the noise in this market should continue to be difficult to handle. I think that longer-term we will see this market reach towards the 0.90 level, which is of course a large, round, psychologically significant number. Because of this, I think that we will probably see a bit of volatility there as well, and I think that once we clear that area, we will probably go looking towards the 0.92 level, and then perhaps the 0.95 level after that. This is a market that will favor the Euro, if for no other reason, just as the lack of clarity when it comes to the future of the United Kingdom, so I think it makes sense that we rally. I think that the 0.8850 level underneath continues to show massive support as we have recently formed a “W pattern” on the hourly chart.
If we did breakdown below the 0.885 level, I think the 0.88 level underneath is even more supportive, and a breakdown below there would be very negative. Ultimately though, this is a market that would need some type of major catalyst to turn things around like that, so I suspect that buying on dips will probably be the best way to deal with this market, as we have also been in a longer-term uptrend for some time. Ultimately, I am bullish on this pair, but I also recognize that there will be a lot of headlines coming out of both London and Brussels that will move this market occasionally. Because of that, small position sizing is probably necessary.