Euro, Sterling, Brexit, EUR/GBP – TALKING POINTS
- EUR/GBP downtrend may have stopped: reversal ahead?
- Pair may now be aiming at potential resistance at 0.9039
- Brexit risks, BoE rate decision could muddy chart set up
Learn how to use political-risk analysis in your trading strategy!
Since reaching a 3-year peak in early August, EUR/GBP has fallen almost five percent. Along its descent, the pair broke through several support channels and price floors but is now possibly reversing its downtrend. EUR/GBP stopped right on the cusp of the 0.8924 support level. The long-reaching wicks downwards indicates markets were flirting with the idea of going lower but were not able to muster the will to do so.
EUR/GBP Traders Hesitant to Commit
EUR/GBP chart created using TradingView
With a possible rebound in sight, EUR/GBP’s next target may be to breach resistance at 0.9039, with another possible obstruction at 0.9060. A break above both barriers with follow-through could boost the pair as optimism about EUR/GBP’s upward prospects is revived.
EUR/GBP – Daily Chart
EUR/GBP chart created using TradingView
However, when looking at a weekly chart, the pair’s prospective recovery is looking grim after it broke through a multi-week rising support channel. The proceeding weekly candles’ small bodies and long wicks extending from both ends indicates indecision despite the significant deviation from the dominant uptrend. Looking ahead, the next possible support zone will be between 0.8620-0.8658.
EUR/GBP – Weekly Chart
EUR/GBP chart created using TradingView
However, it is important to bear in mind key event risk next week that could cause significant price oscillations and distort technical chart set ups. The Bank of England rate decision and possible legal proceedings with Brexit could either amplify the pair’s recovery or cause it to aggressively resume its downtrend from early August.
EUR/GBP TRADING RESOURCES
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--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter