Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. Though the euro attempted another cycle of appreciation against the pound last week, rather successfully at that, now the trend has turned bearish once more.
The British pound’s current position compared to other major currencies is somewhat unclear. This week’s PMI figures, though showing a slowdown in the services sector (which is the most heavily affected by the coronavirus area in Europe as a whole), still indicate growth in the UK economy. However, the pound is facing long-term pressures from the high likelihood of a no-deal Brexit. The United Kingdom and the European Union have less than a month to agree on a deal if it is to be implemented on time, but there is still no progress in their negotiations. The UK government has already begun issuing warnings to businesses that are most likely to be affected by the no-deal conditions after the end of the transition period. Moreover, the recent increase in coronavirus cases and the newly imposed restrictions are expected to further affect the economy negatively. Thus, while the pound may undergo short-term corrections and show a resistance to other currencies, it is weaker than them in the long term, particularly where the euro is concerned.
The European single currency is also currently influenced by a mixture of conflicting factors. Indeed, the Covid-19 pandemic is worsening in the EU once more and lockdowns are not completely out of the question if the situation does not stabilize soon. These measures entail a further slowdown in economic growth. Nevertheless, because the ECB is not going to aggressively force the euro below $1.20, as speculated previously, the single currency will have a chance to strengthen further, particularly if fundamentals in the near future do not prove too disappointing.
In terms of the daily chart, today we have a pivot point for the pair located at 0.9172, with the pair currently trading below it. The daily support levels lie at 0.9124 and 0.9088. The daily resistances are at 0.9208 and 0.9256. The indicators of technical analysis agree on a strong buy recommendation today.
