Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. After the smallest of rallies at the beginning of the week, now the trend has turned bearish once again.
The British pound continues to find itself on the list of worst-performing major currencies. The United Kingdom is seriously affected by the coronavirus pandemic, and like many other countries, will suffer a blow to its economy due to the lockdowns. However, on top of all that, there is the added uncertainty of Brexit. After the United Kingdom officially left the EU on January 31, a period of negotiations was supposed to begin. Yet, here we are, three months later, and nothing has been negotiated yet regarding the future relationship of the UK with the European Union.
Both have had to deal with the more pressing issue of the pandemic and the upcoming recession, which hasn’t left much room to think about Brexit in 2020. Still, Prime Minister Boris Johnson insists that he will not extend the talks after the December 2020 deadline, leaving just eight months (or less, if the pandemic continues) for negotiations. Investors were already skeptical when Johnson had 11 months at his disposal to reach a comprehensive trade agreement. With a big chunk of that time wasted, Brexit will most likely continue to destabilize the pound throughout the whole year.
This is not to say that the euro will have an easy time overtaking the pound, though. The European single currency has issues of its own. One of the main problems is deciding how to deal with the financial fallout from the pandemic within the eurozone, an issue on which there is much disagreement within the union. Today there will be another key meeting to discuss stimulus, joint debt, and other proposed measures to help battle the recession that lies beyond the pandemic. All in all, the EUR/GBP will signify the clash of two weak currencies for the time being.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8796, with the pair currently trading well below it. The daily support levels lie at 0.8752 (overcome) and 0.8729. The daily resistances are at 0.8819 and 0.8863. The indicators of technical analysis agree on a strong sell recommendation.
