Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. After reaching a major peak of 0.9396 on August 9, the pair has been retreating. However, this week might see the beginning of a new upward wave.
The British pound is entirely under the influence of Brexit news. This week British PM Boris Johnson is busy meeting European leaders. He already met with German Chancellor Angela Merkel, who told him he has 30 days to come up with two alternative plans to the Irish backstop, since he insists that the EU needs to remove it from the agreement. Now he needs to propose at least two options of what the Irish backstop can be replaced with in order for the EU to consider his request.
He is meeting with French President Emmanuel Macron next, who typically has an even harder stance than Merkel on Brexit. So far, Jonhson has decried the Irish backstop but has not proposed any alternatives to it, other than suggesting that Ireland should abandon the EU rules and form a tighter relationship with the United Kingdom instead. The PM is mostly trying to pressure the bloc by waving the threat of a no-deal Brexit in their face, hoping they would give in to his demands. His approach has so far proven bad for the British pound and will likely continue to weaken it.
Meanwhile, the European single currency continues to face other trouble, besides Brexit. These days there’s a lot of talk about the political situation in Italy, where the Prime Minister just resigned. Moreover, eurozone data shows a faster slowdown in the economy than previously expected. However, today’s manufacturing and services PMIs came in better than expected, so the euro will likely overtake the pound, at least in the daily term. That is, unless the minutes from the ECB’s policy meeting reveal any major plans to loosen monetary policy further.
In terms of the daily chart, today we have a pivot point for the pair located at 0.9140, with the pair currently trading above it. The daily support levels lie at 0.9117 and 0.9092. The daily resistances are at 0.9165 and 0.9188. The indicators of technical analysis are currently mixed but suggest a strong sell might be profitable in the daily term.
