Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. These days the pair appears to be decreasing in value and is trading near levels previously reached in early September, around the 0.89 level.
The central issue for the British pound at the moment is Brexit, where the pressure is quickly ramping up. Naturally, the United Kingdom’s separation from the European Union has been a factor influencing the pound since the Brexit referendum years ago, but now there really is no time left for the two sides to reach a compromise. Any deal needs to be agreed within the next seven days or there will be no time to ratify it before the year’s end, when the transition period for the UK expires. Nevertheless, the negotiations are still going on, and with two of Johnson’s cabinet members who supported Brexit resigning, there is now more hope that the British PM may finally agree to some of the EU’s terms in order to get a deal. Even though we’re almost at the finish line, investors remain optimistic about a last-minute trade agreement, which is boosting the pound’s prospects.
As for the European single currency, it does not seem to have any factors working to its favor at the moment. The European economy is pressured by the second wave of the coronavirus pandemic. The current round of lockdowns might help decrease the Covid-19 infection rate (and already seems to be doing so in the countries that employed such measures first), but it will have a negative impact on economic growth in Q4. The European Central Bank is anticipating this, and has signalled it will loosen its monetary policy further at its next meeting in order to provide extra support for the economy. Together, these factors are keeping the euro’s outlook bearish.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8934, with the pair currently trading above it. The daily support levels lie at 0.8908 and 0.8888. The daily resistances are at 0.8954 and 0.8980. The indicators of technical analysis agree in strongly recommending a sell position today.
