The euro broke down below the 0.8650 level, significant support on the weekly charts against the British pound. By doing so, it looks as if we have much further to go to the downside. Perhaps it is built upon the idea of the Brexit being delayed, but it certainly looks as if we are seeing British strength overall. With that, it looks like we are continuing to see this market break through what I considered to be the “midline” of the chart, as we have been consolidating between 0.83 and 0.90 for 3 years now.
Short-term rally should be thought of as selling opportunities, as the market starts to price in the idea of the United Kingdom not falling apart completely. At this point, even if we get some type of fear of a “no deal Brexit”, that will probably be the final flush in value of the Sterling, and then will go looking towards finding value again.
Keep in mind that this is a great chart to triangulate, right along with the EUR/USD and GBP/USD charts. The US dollar is softening against both currencies, but this shows that the British pound is strengthening much quicker than the euro, which of course shows itself over here as well. All things being pushed together, it makes sense that we are continuing to drop from here.
That being said, if we break above the 0.8650 level on a longer-term chart, perhaps as some type of daily close, then perhaps it was a false breakdown but clearly this is an area that has taken a lot of momentum to break through, and the fact that we have it’s a very negative sign indeed. It’s very likely that we will stretch to the downside to fulfill the bottom of the larger consolidation block.
