Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. Since around mid-September when the pair peaked at 0.9253, the trend has shifted towards a bearish one. This is hardly surprising, considering the looming Brexit negotiations deadline.
The British pound is indeed baiting its breath as both the European Union and the UK government have some tough choices to make today and tomorrow. October 15 marks the beginning of a two-day European Council meeting, the last opportunity for EU leaders to gather in time before the end of the transition period. In addition, UK Prime Minister Boris Johnson has sworn that his country will end the negotiations if there is no deal by the end of this summit, presumably because there won’t be enough time to pass the necessary legislation if a deal is agreed later in the year. While the United Kingdom has little control over what goes on during the European Council meeting, it will be up to Johnson to decide if the United Kingdom is going to unilaterally end the negotiations tomorrow, or break his earlier promise and commit a few more weeks to a last-minute attempt at a compromise. Needless to say, the British pound will benefit from a possible extension of the talks and suffer if they end abruptly this week.
The euro, meanwhile, will also be influenced by the European Council meeting, but not just because of Brexit. The second wave of the coronavirus pandemic is sweeping through Europe at the moment with more force than the first one did. As a result, experts are concerned that there will be even more damage to the economy, and thus more need for a new stimulus plan. If the summit manages to produce any promises on that front, the euro could strengthen. As far as Brexit is concerned, a deal will be good for the euro as well since the EU is not too eager to lose the UK market. However, serious concessions will have to be made and as of now, it is not clear whether EU member states are willing to make them. But thanks to the pandemic’s devastation, the bloc might be more willing to compromise than ever before.
In terms of the daily chart, today we have a pivot point for the pair located at 0.9051, with the pair currently trading below it. The daily support levels lie at 0.8980 and 0.8934. The daily resistances are at 0.9097 and 0.9168. The indicators of technical analysis agree on a strong sell recommendation today.
