Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. The pair peaked last Friday but has since then been undergoing a downward correction.
The British pound is under a lot of pressure caused by Brexit. Economists are seeing inflation slip from the levels projected earlier on worries about the upcoming no-deal Brexit. The current Prime Minister of the UK, Boris Jonhson, is not negotiating with the EU right now. He previously said that he would not enter talks unless the EU removes the Irish backstop from the withdrawal agreement. This has brought the Brexit negotiations to a standstill and now the United Kingdom is steadily heading for a hard Brexit in October. Investors expect a continued weakness in the pound and likely we can see parity before the year’s end.
The euro, on the other hand, is reacting to very mixed signals. First of all, the disappointing fundamentals continue to weaken the EUR. Just today the industrial production metric for the eurozone came in much worse than expected. Additionally, Brexit is also worrying the EU, and now there’s also political trouble in Italy. However, the euro seems to also be supported by the prospect of more stimulus measures from the ECB. Though monetary policy loosening tends to have the opposite effect on currencies, it is expected to improve the economic outlook in the eurozone, which will then be good for the euro.
In terms of the daily chart, today we have a pivot point for the pair located at 0.9249, with the pair currently trading below it. The daily support levels lie at 0.9222 and 0.9202. The daily resistances are at 0.9269 and 0.9296. The indicators of technical analysis are confident in giving us a strong buy recommendation.
