EUR/GBP: Takes out R3, eyes 61.8% of late Aug – recent Oct low retracement at 0.8951

• EUR/GBP is making tracks to the upside while the pound is falling to the wayside ongoing Brexit concerns as we head towards the BoE this week.
• EUR/GBP is taking on R3 supported by the 4hr 10 & 21 SMAs on pullbacks within the rising trend and channel breakout – Eyes to 23.6% Fibo of April lows- Aug highs at 0.8984 and 61.8% of late Aug – recent Oct low retracement 0.8951.

While Brexit is a weight on the pound, so too are politics on mainland Europea with the Italian debt see as a cause of concern to the whole eurozone according to the EU Commision.  

“Actual stagnation in Italy, Q3 GDP at 0%, reinforces the 5 Star/League insistence on a 2.4% budget deficit to lift Italy out of incipient recession. How will the EU insistence on restraint play with the Italian electorate?” –

Joseph Trevisani, Senior Analyst at FXStreet.

However, there is more focus on Brexit in the market and any hope that PM May can somehow succeed in a Brexit agreement pushing through Parliament with her party so divided seems almost far-fetched.  Sticking issues relating to the Irish border remain up in the air and no solution has been found since the  European Council Meeting on 17-18 October.  The next EU Council meeting will be held on 13-14 December.

UK to face rating downgrades

The S&P rating agency has said that a no deal Brexit could push the UK into a recession lasting 4-5 quarters with GDP contracting by 1.% n 2019 and 1.5% in 2020 – and ultimately harm some credit ratings.

EUR/GBP levels

Analysts at Commerzbank noted that EUR/GBP’s recovery off the 0.8723 Fibonacci retracement is eroding stronger resistance offered by the 55-day ma at .8901 and the resistance line at 0.8888:

“We will wait to see if this fledgeling break higher is sustained and wait to see if the market CLOSES above this key resistance. The .8723 Fibo retracement guards the 8700/.8697 June low. Failure at .8697 would target the 0.8620 2018 low.”

Meanwhile, while holding in bullish territory and above the 21-D SMA, bulls can target the  23.6% Fibo of April lows- Aug highs at 0.8984 ahead of 61.8% of late Aug – recent Oct low retracement to 0.8951.