- In what appears to be a risk-off theme to start the week, sterling is sharply lower across the board on yet further decry with respect to Brexit.
- EUR/GBP is currently trading at 0.8811 after reaching an opening gap high of 0.8825 from a low of 0.8787.
- Daily RSI is sharply higher with plenty of room to go in a bullish rebound – price targets a break of the descending channel resistance through R2 at 0.8825.
On news that Brexit secretary, Dominic Raab, has been forced to make an emergency visit to Brussels at last minute to seek more time from the EU’s chief negotiator, Michel Barnier ad a plan to strike a backstop deal has fallen through and as the PM is facing a possible cabinet revolt at home, the pound is under immediate pressure as markets open. Cable has fallen below the rend line support that it has been building 3rd October lows down at 1.2920 and the cross spikes to test R2 at 0.8825, reinforcing its own trend line support and now likely destined higher in a new bullish wave within the descending daily channel.
Breaking News: Brexit on knife’s edge, Sterling sharply lower across board
The news comes on the same weekend that the IMF meetings in Bali pretty much summed out how the global economy is currently perceived in the market’s – on ‘shaky grounds’. Analysts at ANZ New Zealand Bank described the meetings as being concluded with the Indonesian president warning “winter is coming”, “and some participants interpreting a 6.4 quake that woke attendees over the weekend in metaphorical terms as regards the global economy and markets.”
Over the weekend: Brexit back under a microscope as tempers flare
“Trade tensions were a theme cited in the IMF cutting its growth forecasts while rising US yields and the USD were also a hot topic. Add in the yuan, Brexit, EM pressures, Italy’s budget and the sudden step-up in equity market volatility and there was certainly no shortage of things to talk about,” analysts at ANZ wrote.
EUR/GBP might be a little higher if it wasn’t from the general risk-off mood at the start the week with EUR/USD extending its bearish correction also. On Friday, the pair was deteriorating with a wider DE-US yield spread as nerves took hold with traders getting set for the Italian budget deadline today and in anticipation of rating agencies reviews coming up. However, with the Irish border remaining a key an issue as well, traffic is likely to remain two way and we can expect a volatile week ahead in EUR/GBP.
EUR/GBP levels
The 0.8723 Fibonacci retracement level is well planted now and the cross is eyeing a test of the 200-D SMA in close quarters located at 0.8837 which guards 0.8924 as being the 50-D SMA, through the 38.2% Fibo of April’s low at 0.8644 to 27th August highs at 0.9098. Daily RSI is sharply higher with plenty of room to go in a bullish rebound – price targets a break of the descending channel resistance through R2 at 0.8825.