The Forex marketplace is the world’s busiest market, and it only stands to reason that the currencies of the biggest economies in the world will see the most action. The U.S. dollar is the most widely traded, and right after that comes the euro and the British pound. Watching the interaction between the EUR/GBP is interesting right now, particularly because now that the euro has hit its seven week high point, currency analysts believe that this pair is going to stay pretty much flat for the time being.
There is a support line right now at the 23.6% Fibonacci expansion point at 0.7158. Resistance occurs at 0.7403, which is the falling trend line. There has been a recent high of 0.7278, which stays well within the range, albeit on the lower side. The 38.2% Fibonacci level of 0.7084 also is relevant, especially if the falling trend line continues to be a downward mover. These are all important price levels to keep your eye on right now. The closer that the price line comes to touching these levels, the higher the probability of a sudden price reversal becomes. Range bound trades like this can be frustrating for long term traders, but for short term traders, it creates an ease of predictability, and when use right, this can be used to create big profits–even when the asset’s price is moving sideways like this one is expected to. Isn’t that one of the great things about short term trading, though? When others see frustration, we can find opportunities to make money while others sit on the sidelines.
The fact that the resistance level right now is a falling trend line might be an indicator that prices are moving downward, and that could conceivably set the stage for a bearish outlook on EUR/GBP. However, with an uncertain Bank of England move in the future, it’s hard to tell what kind of movement will occur as traders are generally speculating right now. When people guess, prices tend to stay range bound, and there’s no reason to believe that this will be different. Also, with uncertainty coming from U.S. markets, there’s potential that this could pull down (or push up) both of these currencies, creating even more uncertainty. It all depends on how much risk you are able to stomach and the timeframe of the trades that you are looking at executing, just be cautious as you move forward here.
It’s also interesting to note that this asset’s price is currently seeing an inverse relationship to the S&P 500. This U.S. based index is struggling right now, and although the euro might have a dismal perception by much of the public, it is moving well in relationship to the most accurate measure of the U.S. economy. If you find a binary options broker that offers pairs, finding one that pits the euro against the S&P 500 could be a very lucrative trade. The downside to this is that as the Fed gets ready to raise interest rates, this proposition becomes riskier and riskier.
For longer term focuses, this means that you should avoid trading this pair for the time being. For those that see short term potential, primarily those that trade on 60 second to five minute binary options, there is a ton of potential right now. There are clearly defined support and resistance lines, and the pair is expected to stay right within those ranges. It sets the stage for a very lucrative channel strategy, given the presumption that no breakout occurs in the next few days.