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EUR/GBP: bulls looking to clear wedge resistance at 0.8560 on sterling weakness

  • EUR/GBP is on the verge of a major break to the upside as it continues to test the key ascending resistance line of the rising wedge formation established on the 14th of this month while political tensions flare up over Brexit in the Tory party, weighing significantly on sterling.
  • EUR/GBP has been ascending in a steep bullish channel on the daily sticks from a low of 0.8723 to a high of 0.8857 and to a touch below the 50% retracement between the ear;y April lows and late August highs. The key MA is the 21-D SMA that has confluence with the 50% fibo and the pair subsequently sold off to a recent low of 0.8798.  

Since last week’s EU summit, PM May has been proposing a possibility that the whole country would remain in a “temporary customs arrangement” after the transition period ends in 2021 whereby the Irish border remains the 5% of the negotiation left up in the air. The EU is evaluating whether this proposal could be an acceptable alternative to the Northern Ireland-only backstop that it has otherwise been proposed.

The latest from No 10 Downing Street  

The latest is that No 10 Downing Street is denying the cabinet row and have rather termed the discussion at the longer-than-usual meeting as ‘impassioned’ as the Cabinet members held “an impassioned” discussion about the importance of time-limiting any Brexit backstop arrangements agreed with the European Union as part of the divorce negotiations, as the Guardian reports over the longer-than-normal 1hr 45min Cabinet on Tuesday morning.

“A string of ministers have voiced concern about the importance of time-limiting the backstop in behind-the-scenes meetings, including the work and pensions secretary, Esther McVey, and the leader of the Commons, Andrea Leadsom….British officials are putting together a proposal on how the exit mechanism could work for Brussels to consider, although concerns have been repeatedly raised in Brussels and Dublin that a backstop that was not indefinite would not amount to an adequate border insurance policy,” the Guardian explained.  

May also told colleagues today, according to the Guardian, that Donald Tusk, the president of the EU council, had advised her, that the other members of the union stood ready to hold an emergency summit to finalise a Brexit deal if officials were able to reach an agreement in principle.

EUR/GBP levels

Analysts at Commerzbank have noted that EUR/GBP continues to recover off the 0.8723 Fibonacci retracement which guards the 8700/.8697 June low:

“This rebound is viewed as corrective only and near term rallies will find initial resistance at the 55 day ma at 0.8908 and the resistance line at .8912. Failure at 0.8697 would target the .8620 2018 low Where are we wrong? Above .9011/31 sits the 0.9101 August high. Above there would target the 0.9161 Fibonacci resistance and then the .9291 2009-2018 downtrend line.”

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