Day three: our potential EUR/GBP trade

The EUR came under strong selling pressure across the board, but predominantly against the JPY after Mario Draghi said his forward guidance may help to weaken the EUR. 

Real interest rates may also fall as a consequence and this is important as four of the seventeen nations are seeing negative inflation rates, which is creating positive real interest rates.

EUR/GBP has fallen as a result, hitting a low of 0.8330, but has found reasonable buyers here.

If we look at EUR/USD and GBP/USD, both pairs are at a very interesting juncture, with EUR/USD testing the 2008 downtrend, while a break of 1.6605 on cable would be a bearish development. It seems likely that falls in either of these pairs will have ramifications on EUR/GBP.

Strong upside seems tough given the currency fighting language from the ECB, however I still favour upside in the pair over the coming weeks, although around 0.8500 to 0.8600 becomes a good longer-term selling opportunity.

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