Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. Since the beginning of August we have not seen any significant changes to the trend of this pair, which continues to be volatile, with lots of ups and downs within a narrow channel.
Things are really not looking up for the British pound. Politics continue to be a major factor when it comes to the prospects of the GBP, with the pressure of a hard Brexit weakening the pound. According to the latest developments in the negotiations between the UK and the EU, there is still not much progress, and the two sides now have about two months to reach an agreement if it is to be ratified on time. In addition, this week’s GDP report from the United Kingdom showed a staggering contraction of over -20% on average for the past three months. Though the numbers were slightly better than the forecasts, they still indicate a deep crisis in the economy of the United Kingdom as a result of the coronavirus pandemic and lockdowns. The Bank of England also has a grim prognosis regarding the recovery process in the UK and intends to keep the stimulus flowing, though so far it has rejected negative interest rates as a countermeasure. All things considered, the pound simply does not have much in its favor.
Compared to the pound, the euro is doing far better. There are fewer risk factors in the European Union. Economic recovery is underway, with ample stimulus already agreed upon, and improving fundamentals across the board. There have been fears of a second wave of the pandemic, particularly considering the recent increase in new Covid-19 cases in Spain, France, and Germany. Though the numbers are not alarming yet, if the situation worses, the prospects of an economic recovery in the eurozone will suffer. But for now the situation appears to be under control, and so the euro is going to remain steady for the time being.
In terms of the daily chart, today we have a pivot point for the pair located at 0.9027, with the pair currently trading above it. The daily support levels lie at 0.8998 and 0.8959. The daily resistances are at 0.9066 and 0.9095. The indicators of technical analysis are mixed but lean towards a sell recommendation today.
