Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. For the two weeks in the middle of November, this pair rapidly fell to a low it hadn’t touched since last year. However, last week there was a trend reversal, with the euro quickly recovering some of its lost positions to now trade at a two-week maximum.
At present, there aren’t any domestic factors strongly influencing the British pound sterling. The negotiations over the issue with the border between Northern Ireland and the rest of the United Kingdom are still ongoing, so for now panic over Article 16 is absent. Furthermore, even the news of Omicron, the new highly contagious Covid-19 variant, has not changed things much for Britain. Yes, the government brought back mask mandates for enclosed spaces such as supermarkets, but Prime Minister Boris Johnson has insisted that there will be no lockdowns, as the administration of regular vaccines and booster shots continues and the UK population is expected to be fairly well protected against severe Covid-19 disease.
Somewhat paradoxically, the euro has been doing a bit better since the news of Omicron broke out. The European Union was already struggling with Delta. Now the bloc’s not-very-highly vaccinated population needs to contend with Omicron as well. Unlike in the UK, in the European Union lockdowns are not only possible, but have already been implemented in some member states. Thus, one would assume that a risk-loving asset like the euro would suffer amid the coronavirus panic, but so far this hasn’t been the case. Omicron seems to be less deadly than Delta, which could improve coronavirus survival rates if the new variant eradicates the previous one. This could be one reason why the euro has reacted better than expected to it. Another explanation is that the ECB remains committed to an accommodative monetary policy and thus seems better prepared to tackle another grim chapter of the coronavirus pandemic, while the Bank of England was getting ready to tighten things up but the new Covid variant might prevent it from doing so.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8516, with the pair currently trading below it. The daily support levels lie at 0.8502 and 0.8478. The daily resistances are at 0.8539 and 0.8554. The indicators of technical analysis agree in strongly recommending a buy position today.
