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Euro May Rise vs GBP if Brexit Risks Escalate: Key Ruling Ahead

Euro May Rise vs GBP if Brexit Risks Escalate: Key Ruling Ahead

Dimitri Zabelin, Analyst

EUR/GBP, Euro, Sterling – TALKING POINTS

  • EUR/GBP is rapidly approaching critical four-month support
  • Break below could accelerate the pair’s already-rapid decline
  • Brexit tension could reverse selloff if capital flows out of GBP

Learn how to use political-risk analysis in your trading strategy!

EUR/GBP has declined over six percent after reaching a three-year peak in August and closing higher for 14 consecutive weeks. The pair is now within spitting distance of key support at 0.8786, a floor not last reached since May. A break below could accelerate the pair’s already-aggressive selloff and expose EUR/GBP to a support range between 0.8672-0.8728 (red parallel channel).

EUR/GBP – Daily Chart

Chart showing EUR/GBP

EUR/GBP chart created using TradingView

Zooming out to a weekly chart better illustrates the pair’s spectacular decline, especially after it broke through a multi-month rising support channel (yellow parallel lines). As the pair approach a key support zone between 0.8620-0.8717, traders will be anxiously watching to see if the pair either bounces back or capitulates. Traders may wait to commit capital in either direction until there is a break with follow-through and political clarity.

Will EUR/GBP Recover or Continue its Plunge?

Chart showing EUR/GBP

EUR/GBP chart created using TradingView

Brexit: What’s Happening Next Week?

Political volatility in the UK in the upcoming week could have radical implications for technical patterns and therefore warrants an assessment. The Supreme Court will rule whether Prime Minister Boris Johnson’s suspension of Parliament was legal, and the outcome could result in significant price moves in the British Pound in either direction. Traders may wait to add exposure until there is a clearer path forward.

EUR/GBP 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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