Today we would focus on Europe as we take a look at the EUR/GBP currency pair. There have been three rising and falling waves in May for this pair, with each consecutive bottom lower than the previous one - this is the point where we find ourselves today, with the pair trading near 0.8721.
The troubles for the euro continue. Despite the single currency doing better yesterday on account of the political developments in Italy - eurosceptic parties failed to form a coalition - the currency remains mostly influenced by the economic situation in the eurozone. That remains the same: inflation is missing targets and wages are seeing lukewarm growth. The euro might receive a boost tomorrow based on economic statistics from Germany regarding unemployment, but overall we expect the EUR to continue weakening against other currencies.
Meanwhile, not much is happening that can affect the British pound. The UK currency took its biggest Brexit-inflicted blows last year, so investors are already used to the current lows. Moreover, employment remains high and inflation is only slightly above the target levels, so we expect only one interest rate increase by the Bank of England in 2018, though it is not certain when. Still, it is possible for the pound sterling to appreciate against the euro a little, considering the EUR’s current weakness.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8750, with the pair currently trading below it. We expect the EUR/GBP to continue declining, so look towards the nearby support levels at 0.8702 and 0.8674. The indicators of technical analysis unanimously agree on a strong sell signal.
