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EUR/GBP Testing Resistance Ahead of Pivotal EU Council Meeting

EUR/GBP Testing Resistance Ahead of Pivotal EU Council Meeting

2020-10-09 10:00:00
Nick Cawley, Strategist
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EUR/GBP Price, News and Analysis:

  • Will the EU and UK decide that a deal can be reached?
  • EUR/GBP trapped in a narrowing range.
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Crucial European Council Meeting Next Week

Trade negotiations between the EU and UK are set to dominate the headlines next week ahead of the two-day European Council meeting starting on Thursday. This meeting has always been seen as a make-or-break event to see if a trade deal can be reached with the UK, or if not then the focus will fully turn to the EU trading with the UK on WTO-terms from January 1, 2021. UK PM Boris Johnson has also said that he needs to know by October 15 if a deal is possible. This deadline, however, can still be broken, especially if there is a chance of a deal. EU chief negotiator Michel Barnier has already said that he will continue to negotiate until the end of October if a deal seems possible, while PM Johnson will not throw away the opportunity of a deal for a matter of a couple of weeks. The lead up to next week’s meeting will see increased news flow and narrative and Sterling’s volatility will rise in tandem.

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EUR/GBP is currently trapped between 20-dma resistance and 50-dma support with both simple moving averages holding sway over the last two weeks. A recent series of lower highs were broken, just, on Wednesday, taking the edge out of the prevailing bearish sentiment and a break and close above the 20-dma should see 0.9155 to 0.9165 come back into play ahead of the 23.6% Fib retracement at 0.9213. A break below the 50-dma at 0.9066 opens the way to the 200-dma at 0.8948 and the 38.2% Fib retracement at 0.8891.

EUR/GBP Daily Price Chart (January – October 9, 2020)

EUR/GBP Testing Resistance Ahead of Pivotal EU Council Meeting
EUR/GBP MIXED
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 1% -1% 0%
Weekly -33% 7% -18%
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IG Retail trader datashows 45.87% of traders are net-long with the ratio of traders short to long at 1.18 to 1.The number of traders net-long is 2.73% lower than yesterday and 11.75% higher from last week, while the number of traders net-short is 8.35% lower than yesterday and 8.60% higher from last week.We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/GBP prices may continue to rise.

Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR/GBP price trend may soon reverse lower despite the fact traders remain net-short.

What is your view on EUR/GBP – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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