EURGBP Technical Outlook: DownTrend Remains in Place
Euro and GBP Talking Points:
- EURGBP remains in a downward channel and the technical picture continues to be negative.
- Italian budget worries simmer in the background.
The DailyFX Q3 EURand GBP Forecasts are available to download.
EURGBP Downtrend and Fibonacci Retracement
After hitting a recent one-year high of 0.90987 on August 28, EURGBP has trended lower, respecting a down channel started off the high. Both the top and the bottom of the short-term channel have in 4 confirmation touches or more, giving credibility to the move. Ove the last two days the technical picture has turned slightly more bearish with the pair now trading in or just below the 20- and 50-day moving average, a negative set-up. In addition, the 38.2% Fibonacci retracement of the December 2016 – August 2017 move cuts across at 0.89240. If this is broken the September 20 low of 0.88478 comes into play just ahead of the 200-day moving average at 0.88370.
Euro traders will be closely watching developments in Italy over the next two days as the coalition government continues to argue with the Italian finance minister over the 2019 Budget. 10-year Italian bond yields are creeping back up towards 3.0% (yields rise as prices fall) and may well trade back up to their recent high at 3.25%, exerting downward pressure on the euro. The Five Star Party have already said that they will block the Budget unless funds are made available for their social welfare spending program.
EURGBP Daily Price Chart (July 2017 – September 26, 2018)
IG Client Sentiment Datashow that retail investors are 42.2% net-long EURGBP and coupled with recent changes, this gives us a mixed trading bias.
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