EUR/GBP Technical Analysis

The indicators of technical analysis are a bit mixed but lean towards recommending a sell position today.

Technical Analysis
Dec 17, 2020

Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. Despite a steady climb last week, over the past few days the rate has dropped to a two-and-a-half week minimum.

We are now in the very last stretch of the Brexit drama, which is the main event affecting the pair at the moment. Blowing past all deadlines, negotiators from the United Kingdom and the European Union continue their intense last-minute talks. Though a meeting last week between UK Prime Minister Boris Johnson and European Commissioner Ursula von der Leyen cast doubt over the possibility of a trade agreement, now the tables have turned. Though nothing has been officially announced, there have been rumors from within the EU and the UK that an agreement is, in fact, taking shape. The fact that both sides wanted to keep working together even though there is so little time left shows that they believe a compromise is still possible. We are currently seeing the sterling make gains on the renewed optimism about the UK and the EU having a close trading relationship even after the transition period ends. Thus, if a trade agreement is reached after all, the British pound will stabilize.

As for the European single currency, it remains strong due to risk appetite prevailing on the markets. The ECB’s latest decision to boost its asset purchases was welcomed by the euro as a step towards economic recovery in 2021. There is also broad optimism that the EU will follow the UK and the US in approving the Pfizer and Moderna vaccines and begin mass vaccinations against Covid-19 soon. All of this points to a much healthier eurozone next year. However, at present the pound is just too strong - for now - due to the hopes of a trade agreement between the UK and the EU. If the talks collapse and a no-deal Brexit becomes the default scenario, the euro will strengthen against the pound.

In terms of the daily chart, today we have a pivot point for the pair located at 0.9025, with the pair currently trading below it. The daily support levels lie at 0.8993 (overcome) and 0.8959. The daily resistances are at 0.9059 and 0.9091. The indicators of technical analysis are a bit mixed but lean towards recommending a sell position today.

Anna Sneider

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