• During the trading session on Thursday, we have seen the euro go back and forth against the British pound, as we continue to hang around just above the crucial 0.85 level.
• This is an area that’s been important multiple times on the way up as well as the way down, and as a result I think we’ve got a situation where market memory is coming into play.

I tend to use this pair as a measuring stick, and as a relative strength meter for these 2 currencies. If we get a stronger currency in this pair, typically that currency will do better against the US dollar. This is a great way to triangulate what should be happening in the EUR/USD or GBP/USD pairs, and it’s a trick I use all the time. Ultimately, it comes down to whether or not the US dollar is strong or weak and then picking which one of these 2 currencies are heading in the opposite direction and will give you the most “bang for your buck.” It’s not that both currencies can’t rise against the US dollar, but over the last couple of weeks, you can see that the euro rose against the British pound, and it’s no big surprise that arose against the US dollar simultaneously.

Technical Analysis

The technical analysis for this market is a bit interesting at the moment, because we broke so much higher than the 50 Day EMA, and now look like we are trying to do everything we can to form some type of bullish flag. Whether or not that holds up remains to be seen, because it is a little bit early to call it that, but if we can break out to the upside, it’s worth noting that the “measured move” of the bullish flag as to the 0.8650 level, an area that’s been important multiple times in the past and I do believe would be resistance. On the other hand, if we were to break down below the 0.85 level, we do have the 50 Day EMA sitting just below there to offer even more support.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.