Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. After a dramatic upswing last week, the price underwent a downward correction. Even so, it is currently trading at a three-month maximum.
The British pound continues to find itself under pressure as the Brexit issue is heating up. Boris Johnson’s recently proposed Internal Market Bill is at the center of the newest Brexit-related scandal. The bill contains clauses which violate international law and go against the Brexit withdrawal agreement. The UK government refused the EU’s request to drop the bill and has instead presented it to the UK Parliament for discussion. Then it became clear that even MPs from Johnson’s party are against the bill, so the Prime Minister was forced to change the proposal and amend some of the more problematic clauses. The Internal Market Bill, in its new form, will still be debated next week as the UK moves dangerously close to the deadline for a trade deal with the EU. The European Union seems to bide its time and wait out the decision of the UK parliament before it makes another Brexit move. Due to this diplomatic falling out, investors are now doubtful that the UK will manage to negotiate a trade agreement with the European Union, which is bad news for the pound.
Meanwhile, the euro is enjoying a newly-found confidence from investors. Though many suspected that the ECB will aggressively target the euro as its chief economist said a rate of $1.20 is going to harm the economy, President Lagarde sent a milder message at last week’s policy meeting. This is now encouraging investors that 1.20 USD is not a hard maximum for the euro and that the European single currency can go higher in value. Considering the overall appreciation of the euro and the simultaneous weakening of the pound, we expect the pair to remain bullish.
In terms of the daily chart, today we have a pivot point for the pair located at 0.9137, with the pair currently trading above it. The daily support levels lie at 0.9066 and 0.9022. The daily resistances are at 0.9181 and 0.9252. The indicators of technical analysis agree on a strong buy recommendation today.
