EUR/GBP Technical Analysis

The indicators of technical analysis agree on a strong buy recommendation today.

Technical Analysis
2020年9月10日

Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. Despite a steady decline observed in the movement of this pair in August, now the pair is gathering a new bullish momentum due to the Brexit complications.

The British pound sterling is going through yet another rough patch due to increasing pessimism about the possibility of a free trade agreement between the European Union and the United Kingdom. This week the UK government has angered the EU by drafting a bill that is in a direct conflict with the Brexit withdrawal agreement signed between the EU and the UK after more than two years of difficult negotiations. The issue is once again Ireland, as the EU has fought for a long time to prevent a hard border on the island, which would hinder the close relationship that Northern Ireland and the Republic of Ireland have. The new UK bill will reportedly place a hard border and customs checks on the island. Though Boris Johnson has stated that this legislation is only in case the EU and the UK fail to reach an agreement now, the bill is certainly eroding what little trust remains between the two parties. In addition, fellow Conservatives from Johnson’s party have also criticized the move as it shows that the United Kingdom is an unreliable partner if it cannot stick to international agreements it has signed. The negotiations between the EU and the UK were already not going well even before this controversy. The talks continue this week, with the addition of an emergency meeting regarding the so-called Internal Market Bill, on top of the regular round of negotiations scheduled for this week.

The euro, though its position remains precarious against other currencies, has strengthened against the pound in the Brexit commotion. That being said, the European single currency lacks incentives to grow on its own. The ECB has stated that it wants to see the euro below 1.20 versus the dollar, and more aggressive asset purchasing is likely to be the key to achieving this goal. There is a policy meeting of the European Central Bank today that will offer more information about the bank’s plans, though no surprises are expected at the moment. Thus, when looking at the EUR/GBP it is more appropriate to talk about the pound’s weakness rather than the euro’s strength.

In terms of the daily chart, today we have a pivot point for the pair located at 0.9089, with the pair currently trading slightly below it. The daily support levels lie at 0.9046 and 0.9018. The daily resistances are at 0.9117 and 0.9160. The indicators of technical analysis agree on a strong buy recommendation today.

Anna Sneider

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