EURGBP at 200-DMA on Brexit News

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HotForex Market Review
HotForex Market Review

EURGBP, H4 and Daily

The common currency is registering as the strongest currency of the day so far out of the main units. Yesterday’s batch of ECB-speak has signalled an end-of-QE announcement is in the works and markets have been adjusting accordingly. Today’s Eurozone GDP numbers also highlighted that the the strong EUR is weighing on export demand.  EURUSD has extended to a new three-week high of 1.1838, while EURJPY has forayed further into two-week terrain.

Meanwhile, the last hour, EUR formed a significant change against Pound, on the news that the government will publish a backstop plan for the Irish border (which is seen as crucial in the Brexit process). Hence, Fundamentals gave the pound a strong lift and boosted EURGBP up to 23 days highs at 0.8836.

This positive move has been captured by a technical trio. Firstly the break of the resistance at the 200-DAY EMA at 0.8790, the important break of the downtrend channel identified since May 4 and lastly the break of the latest swing high on Friday. The daily momentum indicators are mixed, as RSI crossed above 50, but MACD on the other hand, has flattened at neutral zone the last 2 weeks, suggesting that pair is likely to remain in a consolidation mode.

In long-term, next resistance comes at the round 0.8900, and support is set at 0.8735. Therefore a closing today above downtrend channel at the key level 0.8800, could open the space for March levels, at 89.00-0.8950 area. Oppositevely, it is likely to see EURGBP continue bounding within 0.8700-0.8800 area.

The technical picture in the 4-hour chart, strengthens the possibility of a continuation to the upside, with 20-period EMA moving above both 50 and 200-period EMA. The short-term technical indicators are configurating neutraly to positive,with RSI holding above neutral zone for 8th consecutive session suggesting that there is further steam to the upside. The MACD oscillator slopes in the positive terittory and above its signal line.

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Hence it is likely to see further gains, as long as the support level at 0.8790 holds intra-day. The next immediate resistance is at 0.8850 and support lays on today’s low and PP level, at 0.8765-0.8770. A break this support area could suggest a retest of week lows ( i.e.0.8720)

Nevertheless, the collective gaze of market participants is now falling on the G7 meeting in Canada, which starts tomorrow, and which seems to be mostly seen as a risk event give the escalating hostility over trade.

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