EUR/GBP: Resting on support, will be break or bounce?
Good Afternoon Traders and welcome back to EverythingFX!
The Euro is currently trading at 0.91561 against the Great British Pound during today's London session.
For starters, Let's take a look at the rally this pair has been on despite the Eurozone slowdown, and yes you're absolutely right in thinking that Brexit has been the driving force behind this pair. After printing a double bottom off the level of support at 0.86000 we saw a 700 PIP rise straight into 0.93000 which evidently have been a barrier before on several occasions dating back to 2009.
As Analysts and Traders, we need to know look where we heading next. What is the likely scenario of us breaching these highs, potentially in a hard Brexit I don't see why not. However we know the Eurozone is slowing down, we know we are approaching the Brexit deadline, provided we have some sort of clarity amongst all this uncertainty.
On a Technical picture, we have seen a nice bearish engulfing on a weekly timeframe indicating that the sellers are coming back into the market of this level of resistance. What we now need to establish is the best probable trading setup in and around these levels to target further downside on this. Dropping down to a 4-hour timeframe we can see we have broken structure after printing lows at 0.91000. What I would like to see is some sort of correction to potentially print a new lower-swing-high in and around 0.92500 where we will be closely awaiting bearish reversals before initiating a position with our next level of support at 0.90000 as our target providing us with a good swing of 250 PIPs. What would invalidate my bias right now is a major shift in the Brexit Stance as mentioned above.
Fundamentally, apart from Brexit, we had Eurozone CPI(YoY)(Jul) coming in at 1.0% which came in slightly lower than anticipated at 1.1%. Tomorrow morning we have Manufacturing and Services PMI's coming out which will set the tone for the pair. Stay tuned to our market news section and social media for any change in stance from the ECB and potentially further Brexit Updates.