- EUR/GBP is a complex trade at the moment.
- Brexit continues to weigh and EUR/GBP climbed just over 1% last week.
- Dips bought at 0.8879, the 10 D- SMA and/or a close above 0.8967, 6th March highs, open the 0.9034 October 2017 high, or, alternatively, a series of profit taking could emerge on a long squeeze towards the 21-D SMA at 0.8855.
EUR/GBP is a complex trade at the moment with a hybrid of fundamental factors priced in currently. Firstly, and less obviously, at the end of last week, late Friday, news that the Bank of Japan could tweak its ultra-easy monetary policy as early as next week fueled further demand for the yen in the open in Tokyo overnight.
This gave rise to an additional spike in EUR/USD and GBP/USD as the yen lead the dollar down across the board, extending its losses after last week’s ‘Trump factor’ where the President of the United States kicked up a whole lot of trade war dust, propelling the euro towards the thick daily Ichimoku cloud that spans the 1.1726 to 1.1962 area on the charts – EUR/USD traded as high as 1.1750 overnight on the BoJ news.
While Sterling was also lifted on broad dollar weakness, Brexit continues to weigh and EUR/GBP climbed just over 1% last week, closing at 0.8922. To start the week, there was an EUR/GBP flurry at the Tokyo open where the cross traded as high as 0.8936 from the 0.8925 opening levels although offers took the cross down in a steady decline as the euro was faded within the daily Ichimoku cloud while Sterling picked up a bid on dollar weakness.
Weekend headlines: Brexit plan proposal rejected by EU & G20 risks to growth heightened due to trade and geopolitical tensions
As for the recent trade, the cross has picked up a bid from 0.8910 lows to 0.8933 as the pound begins to crumble again on Brexit angst with a ‘no deal’ remains on the table while the UK’s PM May efforts to sell her plan for a soft Brexit to her own party, the EU and the UK population have had with limited success so far. Just form the weekend, the FT reported, that Michel Barnier, the EU’s chief Brexit negotiator said, “Theresa May’s latest financial services plan would rob the EU of its “decision-making autonomy”. Meanwhile, UK’s Raab will continue the negotiations with Barnier this Thursday.
Eyes will turn to the BoE as UK parliament begin a six-week summer recess on Tuesday – a potential positive for the pound
However, looking ahead, sterling might take a sigh of relief with UK parliament beginning a six-week summer recess on Tuesday, which could simmer down the media coverage on Brexit, and instead, eyes can turn back to economic fundamentals and the BoE meeting coming up on the 2nd August where BoE hike odds were back near 70% for the August the 2nd’s meeting – according to BOEWATCH – something that could favour further downside as the euro runs into supply territory on a technical basis.
EUR/GBP levels
On the daily sticks, the series of higher highs have halted near the top of the 0.8620-0.8970 range – ( a strong technical resistance area is located at 0.8964/68, being the 50% of the 2017-2018 fall and 2018 high). 0.8980 has been left out of scope, for now – (However, daily and weekly momentum studies heading higher, while 5, 10 and 21 daily and weekly moving averages trend north – a strong positive setup). As the BoE comes back into focus and on positive UK data, in the absence of negative Brexit headlines, a series of profit taking could emerge on a long squeeze towards the 21-D SMA at 0.8855 and 0.8816, (the 15th July low support area from 20th June rise). Alternatively, dips bought at 0.8879, the 10 D- SMA and/or a close above 0.8967, 6th March highs, open the 0.9034 October 2017 high and 61.8% of the 2017-2018 fall on the wide as the key upside target.
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