Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. Over the last week we observed a steady decline in the trend, though now a more or less flat short-term pattern has been established.
The outlook for the British pound is often changing these days. Recent fundamental reports from the United Kingdom have exceeded investors’ expectations, which has boosted the pound as a result. However, doubt over the United Kingdom’s ability to reach a trade deal with the European Union is continuing to pressure the British pound. The negotiations are still not producing any tangible results and there are just two weeks to go until the European Council meeting, which is serving as a soft deadline for the deal. In addition, Boris Johnson’s Internal Market Bill has complicated matters, since the PM’s cabinet refused to comply with the EU’s request and drop the problematic clauses of the proposal that clash with the Brexit withdrawal agreement. Just today Ursula von der Leyen, the President of the European Commission, said that if the clauses are not removed, the EU will take Johnson’s government to court. Though the Internal Market Bill is separate from the trade negotiations, it has eroded trust between the UK and the EU and could be used as leverage against the UK in the final round of talks this week.
In terms of the euro, there are no real changes to report. The overall sentiment among investors is bearish. First, recent economic reports from the eurozone have indicated that growth is not recovering at a fast enough pace; inflation is problematically low. Secondly, the number of coronavirus cases in the EU is rising very fast. Just today the city of Madrid entered a full lockdown and others may follow. This will further strain the European economy, even though it is protecting people’s health. Unless more stimulus is announced, the euro will remain weak.
In terms of the daily chart, today we have a pivot point for the pair located at 0.9097, with the pair currently trading above it. The daily support levels lie at 0.9035 and 0.9002. The daily resistances are at 0.9130 (overcome) and 0.9192. The indicators of technical analysis agree on a strong sell recommendation today.
