Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. The movement of this pair has turned erratic lately, as both currencies are strengthening against the dollar and thus having trouble in the head-to-head. The rate has stayed in the range between 0.89 and 0.91 since mid-June.
There is nothing new to move the British pound significantly. The United Kingdom is recovering from the coronavirus pandemic just as the rest of Europe is. Based on fundamentals alone, the UK is doing similarly to the European Union, so neither the GBP nor the EUR has an advantage in that regard. The most decisive factor for the pound at the moment is how the negotiations of a trade deal between the UK and the EU are going, and so far there hasn’t been much progress. Considering all the deadlines, a deal needs to be negotiated in the next three months, otherwise the UK will separate from the bloc in a “hard Brexit” come New Year’s. This scenario will have a devastating effect on the British economy, which is why the pound will be pressured until there is more hope of a deal.
A no-deal Brexit is certainly not desirable for the European Union either, but the bloc will still have 27 members, and rich economies like Germany, France, and the Netherlands to drive it forward. Thus, the lack of a Brexit deal will not affect the EU as much. In the meantime, the euro is benefiting from the recent stimulus package the EU members approved and ECB asset purchasing. Fundamentals are steadily improving and Covid-19 does not pose a serious threat to the continent for now. All in all, the euro has better long-term prospects than the pound.
In terms of the daily chart, today we have a pivot point for the pair located at 0.9039, with the pair currently trading below it. The daily support levels lie at 0.9017 and 0.8989. The daily resistances are at 0.9068 and 0.9089. The indicators of technical analysis strongly recommend a sell position today.
