EUR/GBP: Hanging Over the Abyss
- EUR/GBP faces strong resistance near the 0.8650 region
- The pair faces a much tougher climb than fall
A Range Within A Range
Earlier this month, EUR/GBP failed to sustain a break above the 0.8650 region, which has acted as strong resistance since June last year. This has helped to reaffirm the pair’s tight range between the 0.8650 to 0.8295, give or take some extreme price movements on either side. At the time of writing EUR/GBP was trading at 0.8492, which is basically the centre of what over time has become a narrower range for the pair. On higher time frames, such as the daily chart, it becomes very obvious that price is hugging the bottom of a much wider range between 0.93090 and 0.82954.
Hugging the Bottom
The longer price stays at the bottom of this much larger range, the bigger the worry for EUR/GBP as price shows a willingness to consolidate at much lower levels. Price below 0.82954 for a length of time could ultimately be cataclysmic for the pair, as it would mark a structural break lower. Such a move would leave little in terms of price support until 0.81 region, and beyond that 0.74. The climb higher in EUR/GBP between March and June failed to assuage those downside concerns.
A Harder Climb
Meanwhile, any move upwards in EUR/GBP faces a myriad of resistance, starting with the 0.8650 level. Thereafter, trades face some pretty heavy congestion all the way up to the 0.91 level before getting anywhere near the top of EUR/GBP’s much wider range. In other words, a move higher in EUR/GBP beyond the 0.8650 region will be much more of a battle than any true break below 0.82954. In my opinion, that speaks volumes about the market’s perception about EUR/GBP at the moment.
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