- EUR/GBP is caught up in the crosscurrents in the dollar, GBP and EUR but is testing below critical support levels.
- Italy and Brexit politics are making for a sideshow while US yields and dollar’s fickle strength dominate the headlines – However, we await news on both political fronts.
EUR/GBP is making further tracks to the downside as the dollar sells off to below the 96 handle. The move in the dollar sent the pound on a spike from 1.3050’s to 1.3100 in a flash in what is proving to be almost impossible to gauge over periods any longer than an hourly chart, (certainly not a good environment for swing traders targetting extended TP levels beyond 50 pips).
Crosscurrents at play
Cable is breaking recent highs but caution is required as the DXY holds above a key trend line support around 95.70, for now. EUR/USD is also benefitting from dollar weakness and is on the verge of piercing a trend line resistance just below the pivot having recovered from S2 in a sharp correction, no free meals for the bears down there either.
Meanwhile, there is little tangible to go with on the fundamental side. We had a report from Germany’s IW economic institute earlier that said a no-deal Brexit could cut German exports to the UK by 57% while also outlining the fact that German firms will face billions in extra tariffs as well. The market is waiting for more Brexit noise and keeping a close ear to the ground for the sentiment from the dual between the EU and Italy.
“The EU cannot wait indefinitely for the market to punish Italy for its deficit because the longer and farther Italian bonds fall the greater the chance of eurozone contagion. Nor and for the same reason, can it condemn outright the Italian choices. Diplomatic language concealing the reality that Italy is a sovereign nation is the only answer,”
Joseph Trevisani, Senior Analyst at FXStreet said.
Meanwhile, UK Brexit secretary Dominic Raab is scheduled to deliver a statement on negotiations to leave the European Union in parliament and having updating parliament, we are waiting for a press conference where Raab is set to speak at 1745BST.
EUR/GBP levels
Analysts at Commerzbank explained that EUR/GBP has now sold off to around the 2017-2018 support line at 0.8767, which area will ideally hold and provoke recovery:
“Rallies will find initial resistance at 0.8838 200 day ma ahead of 0.8929 the 55-day ma and will now stay offered below here.”
However, in a note of caution to the bulls, the analyst argued that below 0.8767 could trigger losses to the 0.8700/0.8697 June low.
Share
