EUR/GBP Continues to Bounce Against Stubborn Resistance, Where Next?

The EUR/GBP is being propped up in the trade by staunch resistance in the middle of a sold channel. It looks like it will continue to bounce against Stubborn Resistance, where next?

Strong Money Advices: I have a bullish future for EUR/GBP, it has gotten out of the channels at the right time to enjoy significant support at 14 days. This makes it a strong buy and support area.

New European bond funds are the top funds in a time of crisis, as you can see from this morning’s copy of the Wall Street Journal, which shows that all of the major funds are in or near an all-time high. We have seen this in Europe before and it generally leads to great long term market positioning.

This underscores that strong hands are really feeling the pinch in this market and working to close out their positions as quickly as possible. But, it also means that the momentum has shifted dramatically from the vast majority of traders. Perhaps, it is time to rethink your positions.

I don’t think that a new rally is imminent, but we should expect that next at least one large selling spot at some great resistance levels. For instance, the EUR/GBP may be a decent entry point, but the two main pairs will likely form some sort of pivot resistance that will give us some resistance on the way up.

There is certainly very strong hands trying to close out now, but it appears that most of the others are holding their position. Some big money managers are still hanging in there but are not closing out their positions yet. There is still potential to gain a lot more if they can weather this storm.

We should expect that the weak hands will start to change course shortly. The EUR/USD may get hit hard in the short term as well as the EUR/GBP, but it is not far off now, the major focus is onto the USD at the moment.

So, what will we see as the time gets closer to getting the biggest of all these strong hands off the sidelines? The major focus will move towards the USD/JPY and the EUR/JPY, this will likely coincide with when China decides to start printing more money, it has been moving steadily over the last two weeks, even though the EUR/USD broke out recently. Also, during this time the USD/JPY may get hit hard as well.

If these currencies start to bounce against each other, I would expect a reversal and move in the EUR/GBP to turn bearish. One may consider buying EUR/GBP and holding on to it, it is difficult to predict.

Why is it so important that the USD continues to hold up against this regional group? If the Eurozone gets weaker, so does the US Dollar and as we know the USD always wins, regardless of what’s going on outside of the United States, so we should be prepared for a problem down the road.

We should note that it is the strong hands that are closing now. This means that a few bad days could put everyone else back in.

Time will tell as long as the EUR/GBP breaks out from the channels in one of the strong hands. You may have a double whammy coming on soon so be ready for it.

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