Euro tries to rally against Sterling for the week but fails

The EUR/GBP pair has initially tried to rally during the week but found enough resistance at the 0.88 level to turn things around and form a bit of a shooting star. I find this interesting, because we have recently traded below a couple of hammers, which of course is a very negative sign as well. I think that the market is content to continue to grind lower, and it should be noted that the stochastic oscillator is already in the overbought and crossed attitude. I think that the market will go drifting towards the 0.86 level underneath which has been massive support. A breakdown below that level could open the door to the 0.83 handle.

Eventually, interest rate expectations come into play and I think that’s what we are looking at here. The Bank of England looks likely to raise interest rates at least once over the next year, while the European Central Bank looks likely to continue to “reinvest” into the quantitative easing program. At this point, if we were to break above the couple of hammers earlier in the month, then I think we could rally rather significantly. However, it looks as if the market is going to continue to grind slowly to the downside, which of course is a huge surprise considering this market tends to grind most of the time. It’s not exactly the fastest moving market, but for investors that ends up being a good thing.

EUR/GBP Video 28.05.18