Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. The movement of this pair has been erratic during the past two weeks, going up and down twice. Currently, the rate is in a downward wave pushing below the 0.90 level.
Much has changed for the British pound recently, thanks to the conclusion of trade negotiations with the European Union. Fortunately for the United Kingdom’s economy, the two parties were able to agree on a trade agreement to guide their relationship when the transition period ends tomorrow. Though the deal is far from ideal, it at least guarantees that there will be no fees or tariffs on goods traveling between the UK and the EU, saving UK businesses billions of pounds of potential expenses. The deal was provisionally approved by the EU earlier this week and formally confirmed by the UK Parliament and Queen Elizabeth yesterday. As a result, the prospect of free trade with the EU has boosted the pound. After a heavy bout with the coronavirus, the UK economy was arguably not well prepared for a hard Brexit, so the optimism caused by the deal will last for a while.
There are no factors to weaken the euro at the moment. Even the ECB’s recent increase in asset purchases failed to weaken the single currency. The EU is also seemingly recovering from the coronavirus pandemic faster than the UK, which has to contend with the new, highly-contagious form of Covid-19 that appeared there. But although the prospects of the euro are good, it will likely give up some ground to the pound due to the successful reaching of a trade agreement. The relief regarding the UK economy simply outweighs the euro’s good prospects at the moment.
In terms of the daily chart, today we have a pivot point for the pair located at 0.9041, with the pair currently trading way below it. The daily support levels lie at 0.8995 (overcome) and 0.8966. The daily resistances are at 0.9070 and 0.9116. The indicators of technical analysis are a bit mixed but lean towards recommending a sell position today.
