An obsession for UK-based investors and traders in 2016 will be the expected referendum on whether or not the UK should remain in the European Union.

Although the general sentiment in the business world seems to be that staying in would be better for the economy, there have still been some strong dissenting voices in recent months. How do things currently look for the pound versus the euro (EUR/GBP) exchange rate?

Referendum discussions aside, the year ahead could be an interesting one for EUR/GBP. Last year saw the currency pair trade back to levels not seen since 2008 but, as the dust has settled over the latest stage of the European financial crisis, the exchange rate starts 2016 near to a six month high.

The chart of EUR/GBP shows it is in something of a 'make or break' area. Whenever we have looked at these two in the past, the last time being the 24 September 2015 issue of Shares, the 0.75 zone has been highlighted as an important level to watch. This has successfully stopped rallies since May 2015 and the New Year starts with EUR/GBP within 100 points of this major barrier.

If your view is bearish on the euro and you are expecting it to slide, now looks to be a good time to sell short. EUR/GBP is at the top of its recent major range so if the rally that started in December 2015 is going to run out of steam anywhere, then this is the place. Because that 0.75 level has been such a strong barrier it is a logical place to set a stop loss, and bail out of the trade for a small loss should the euro continue to recover.

And for the EUR/GBP bulls? Patience is the best approach in the short-term. Whenever the currency pair has managed to get this high in the past seven months, the sellers have come out and pushed it back down once again. The first clear sign that this time is different would be if it managed to break through that 0.75 level. If that does happen it is time to take a much more positive view for the euro and start looking for an extended recovery, with 0.80 being a clear first target.

By the end of last year the euro had lost around 5% against the pound. That is a clear negative performance but at one point during the year the euro was down 10% as concerns about Greece's solvency raged on. So the currency actually enjoyed a mild recovery in the second half of 2015.

The two economies are still quite different. The eurozone is a varied blend of historical powerhouses like Germany but coupled with the still-vulnerable southern countries such as Spain. The European Central Bank dropped its deposit rate last month - the rate that banking institutions receive for money they may leave with the ECB - in an effort to get the financial world lending to the wider business community and give the economy a jolt.

The UK economy continues its broad recovery, although at a somewhat shakier rate than enjoyed in previous years. Our central bank is probably contemplating the right time to start raising interest rates following that much-awaited move by the US Federal Reserve in December 2015. It could be another tough year ahead for UK plc with at least a modest amount of uncertainty surrounding the vote on a possible Brexit.