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EURGBP May Retreat as Euro Faces Selling Pressure Ahead

EURGBP May Retreat as Euro Faces Selling Pressure Ahead

Dimitri Zabelin, Analyst

EURGBP TECHNICAL ANALYSIS

  • EURGBP may retreat after reaching 22-month highs
  • Italian politics could sour traders’ appetite for Euro
  • Will the pair be able to stay above new key support?

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EURGBP may retreat to a new key support level at 0.9110 after closing higher for 14 consecutive weeks. Initially, one could have expected for the pair to retreat during the week of July 29 as it began to lose steam. However, unexpected Brexit risks pressured GBP and helped the pair reach over 22-month highs.

The pair came close to the May rising support-turned-resistance channel (red-colored range) but shied away from testing it. Barring any sudden Brexit developments, EURGBP may cool off and test 0.9110 (top red line) as support. Traders may wait to commit additional capital until the pair either bounces or breaks below it with follow-through.

EURGBP to Retreat to New Support Level?

Chart Showing EURGBP

EURGBP chart created using TradingView

Zooming out to a weekly chart shows how the GBP index had been sharply falling while EURGBP was rising. This supports the theory that EURGBP’s rise had less to do with Euro strength than weakness in the British pound. However, we may see this trend reverse next week.

EURGBP Rises as GBP Index Suffers

Chart Showing EURGBP, GBP Index

EURGBP chart created using TradingView

Turbulent Italian politics may pressure the Euro as it did during the 2018 election and throughout the budget dispute between Brussels and Rome. Performing technical analysis on a currency pair where each one is tied to a fundamentally-volatile environment – especially GBP – is extraordinarily difficult. Political oscillations in the UK and Europe have frequently shown to have significant impacts on EUR and GBP crosses.

EURGBP TRADING RESOURCES

--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

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

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