Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. Throughout the past week we have not seen any huge fluctuations in the trend of this pair, largely because both the pound and the euro are risky assets, while this week safe havens have dominated the markets.
The situation of the British pound sterling remains the same as last week and the weeks before that. The currency is under pressure due to the negative consequences of the coronavirus pandemic on the UK economy. Moreover, there is little hope of Prime Minister Boris Johnson extending the Brexit transition period, as the deadline for this decision is in just a few days. Separating from the European Union without a deal was going to be damaging for the UK economy even without a pandemic destroying it first. Now the risks have doubled. Even though the United Kingdom is easing lockdowns and has positive PMI numbers to signal economic recovery, the long-term forecast for the pound is still bearish.
At the moment, the euro is also not holding a particularly strong position because of the high risk aversion on the market. Nevertheless, the European single currency has some factors in its favor, most notably the joint efforts of EU member states to agree on a recovery fund to stimulate the economy. The euro simply appears more resilient than the pound right now, which is why it is still gaining ground against the GBP, even if it is happening at small increments. If investors’ sentiment improves and the fears of a second wave of the pandemic subside, the euro will have the chance to push more aggressively against the pound.
In terms of the daily chart, today we have a pivot point for the pair located at 0.9050, with the pair currently trading slightly above it. The daily support levels lie at 0.9025 and 0.8990. The daily resistances are at 0.9085 and 0.9110. The indicators of technical analysis agree on a strong buy recommendation today.
