Today our gaze will remain in Europe as we take a look at the EUR/GBP currency pair. Without a doubt this pair has been through a lot ever since the Brexit vote. 2017 was the year of difficult negotiations between the United Kingdom and the European Union, which caused further shocks in the pair’s movement. At the very end of the year there was some stabilization between the levels of 0.8857 and 0.8904, but now the EUR/GBP is seeing changes again.
The euro itself is doing well, which is hardly a surprise to anyone. Economic reports from the eurozone continue to indicate growth, allowing the euro to maintain its ground against other currencies. Nevertheless, the euro’s growth was somewhat marred recently by weaker-than-expected inflation, though the impact of this was limited.
The British pound, on the other hand, is also finding support based on fundamentals. Growth in the services sector is leading investors to expect a better GDP for the last quarter of 2017. In addition, since progress was made on the initial conditions of Brexit, we expect things will go much more smoothly in 2018: there are meetings in March and then at a still unfixed date in the fall. The pound will probably be under increased pressure around these dates, but other than that, investors are optimistic that the Brexit talks will go well and a compromise will be struck between the two parties.
In terms of the daily chart, we have a pivot point for the pair located at 0.8845. The pair is currently trading above it, so we should pay attention to the nearby resistances at 0.8877 and 0.8905, in case those are breached. Alternatively, if the pair drops below the pivot, look towards the supports at 0.8817 and 0.8785. The indicators of technical analysis agree on a strong sell position.
