Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. During the month of June this pair had some ups and downs, but still managed to climb and gradually reach three-month maximums. It has since rebounded from those highs but it appears that the level of 0.90 is a strong support. The EUR/GBP has not dropped below it in two weeks.
The British pound continues to find itself in a tight spot. The coronavirus pandemic has all but died down in Western Europe, except for the United Kingdom, where there are still active outbreaks. The UK is reporting about 700-800 new Covid-19 cases per day, which is not as bad as when the virus first reached the island but remains a source of worry for the markets. Moreover, Boris Johnson’s cabinet refused to extend the Brexit transition period, despite the setbacks in the negotiations caused by the pandemic. The Prime Minister has maintained a positive tone and insists that a deal with the EU is possible this summer but the negotiators on both sides have stated that there has been no progress in the talks. The trade deal will likely remain the chief issue for the United Kingdom and the GBP over the next three months. Its pressures are great enough that even PMIs above 50 in the UK have not been enough to strengthen the pound significantly this week.
While a no-deal Brexit would certainly also pose a threat to the European economy as well, it just isn’t such a huge factor for continental Europe at the moment. In general, the euro remains in good shape because investors are more or less confident that there will be an agreement on the recovery fund proposed by the European Commission eventually, which is going to help the eurozone recover from the pandemic faster. In addition, PMIs from the eurozone were better than anticipated this week. We expect unemployment and inflation data as well, which will paint a more detailed picture of the current state of the European economy. Nevertheless, due to the low demand for risky assets, the euro has not been able to strengthen.
In terms of the daily chart, today we have a pivot point for the pair located at 0.9038, with the pair currently trading slightly below it. The daily support levels lie at 0.8995 and 0.8968. The daily resistances are at 0.9065 and 0.9108. The indicators of technical analysis are somewhat mixed but lean towards recommending a buy position today.
