Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. During the first couple of days this week the exchange rate of this pair climbed up, but now the trend has turned bearish again.
The British pound sterling is likely to have a monumental day ahead, as there have been positive developments in the Brexit issue this week. It was announced that a deal has almost been reached. United Kingdom Prime Minister Boris Johnson and European Commission President Ursula von der Leyen have a call scheduled for any minute now, where they are expected to verbally “seal the deal.” Of course, afterwards there will still be a bit of uncertainty as to whether the deal will pass through the ratification process properly, but even the MPs who opposed Brexit in general would prefer a deal over a hard break with the EU. In other words, it is nearly certain that by the end of the day there will be a trade agreement between the United Kingdom and the European Union. This is going to further boost the pound’s prospects, since the UK will avert a Brexit-induced economic crisis (and will only have to contend with the coronavirus, which puts it on an even ground with the rest of the developed world). The pound will stay strong today unless a surprise breakup of the negotiations is called.
Though a trade agreement is beneficial for both sides in the conflict, avoiding a hard Brexit is more beneficial for the UK than it is for the EU. For this reason, a formal confirmation of a trade agreement will weaken the euro against the pound. It is not that the deal will be bad for the euro - it will just strengthen the pound more, allowing it to take charge of the EUR/GBP rate. Aside from this, the European economy is doing fine, all things considered. The euro is likely to remain strong against other currencies. It can appreciate against the pound only if there is no agreement.
In terms of the daily chart, today we have a pivot point for the pair located at 0.9046, with the pair currently trading way below it. The daily support levels lie at 0.8982 (overcome) and 0.8936. The daily resistances are at 0.9092 and 0.9156. The indicators of technical analysis are a bit mixed but lean towards recommending a sell position today.
