Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. Over the span of the past three weeks, this pair’s movement has been very much up and down, with a series of bullish breakthroughs followed by bearish price corrections. At present, the trend is rising again.
The situation of the British pound sterling remains complicated. Though the coronavirus threat is still not over for the United Kingdom, there is now also increasing pressure regarding Brexit that is mounting. The UK government has until the end of this month to decide whether to extend the transition period past December 2020, but that seems unlikely. Prime Minister Boris Johnson has repeatedly said he wants to deal with Brexit as swiftly as possible and that the transition will end this year. Nevertheless, the coronavirus pandemic was not part of that plan. It has set the United Kingdom’s economy back years and has caused a recession even before Brexit becomes a reality. UK business groups warn that if the UK crashes out of the transition period without a comprehensive trade agreement with the EU, the British economy will be absolutely devastated. Any safety-net investments businesses may have had were exhausted by the pandemic. Thus, the prognosis for the UK economy remains grimmer than ever, which in turn is weakening the pound.
On the other hand, the European single currency is doing better due to signs that the European economy will be able to stabilize after the pandemic. The biggest hopes of stability rest on the bloc’s ability to reach a compromise and decide on a coordinated stimulus plan. European leaders will be discussing the EU Commission’s 750 billion euro recovery fund soon. They might propose changes to it, especially considering countries like Finland and the Netherlands are unlikely to accept the plan in its current form. Still, it is likely that some form of stimulus will be agreed upon, helping the single EU market recover from the pandemic more quickly. Thus, the euro has remained strong for the past week and will likely remain so for the foreseeable future.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8912, with the pair currently trading well above it. The daily support levels lie at 0.8891 and 0.8860. The daily resistances are at 0.8943 and 0.8964. The indicators of technical analysis agree on a strong buy recommendation today.
