Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. The trend continues to be a descending one, with the pair falling to lows previously seen in May last year. However, there are signs of bottoming out and a reversal may be in the making.
The British pound sterling has had several stellar weeks, absorbing much of the risk appetite that investors showed on a couple of occasions. Among all risk-friendly currencies, the pound arguably appreciated the most, especially against the US dollar and the euro. The reason for the pound’s strength lies in the United Kingdom’s response to the coronavirus pandemic. Compared to the United States or the European Union, the UK has had a faster vaccine approval process and is leading in terms of total vaccinations. The government has managed to bring a wave of infections with an even more highly transmissible version of Covid-19 gradually under control, which is improving the country’s prospects of an economic recovery. The latest fundamental data from the UK has mostly been good, which is boosting the pound further.
However, the sterling’s ability to pressure the euro is limited. In fact, the outlook of the European single currency (yet another risky asset) is improving at the moment. Several important economic reports from the eurozone, including preliminary PMIs, GDP growth rate data, and inflation rates have exceeded investors’ expectations over the past few days. There is even hope that Italy will resolve its political crisis, which was another, albeit smaller, factor pressuring the euro over the past week or so. Thus, as optimism about the coronavirus pandemic slowing down and the United States getting a massive stimulus package courtesy of President Biden grows, the prospects of the euro will improve. It will likely flatten the trend for a few days, then look for incentives to recover the positions it lost.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8813, with the pair currently trading above it. The daily support levels lie at 0.8799 and 0.8781. The daily resistances are at 0.8831 (overcome) and 0.8845. The indicators of technical analysis agree in strongly recommending a sell position today.
