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EUR/GBP Outlook: Brexit Risks May Push Pair Past Key Resistance

EUR/GBP Outlook: Brexit Risks May Push Pair Past Key Resistance

2019-10-04 03:30:00
Dimitri Zabelin, Analyst
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Euro Outlook, Brexit Latest, EUR/GBP Technical Analysis

  • EUR/GBP hovering at key resistance
  • Break or capitulation ahead for pair?
  • Brexit woes may be crucial catalyst

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

As outlined in last week’s forecast, EUR/GBP cautiously climbed towards critical resistance at 0.8917 after the pair gapped below it on September 13 as part of a broad downtrend after reaching multi-year highs in August. If this is indeed a reversal of the pair’s descent, clearing 0.8917 will be crucial, though recent price action indicates traders are not yet confident to continue higher.

EUR/GBP – Daily Chart

Chart showing EUR/GBP

EUR/GBP chart created using TradingView

The extended wicks suggest a shy yearning to break above the psychological barrier, though ultimately the closes below it signal a lack of resolve. If EUR/GBP continues to fail to breach resistance, the pair may capitulate and retreat below 0.8874.

Looking at a monthly chart, the pair is hovering in a familiar mid-range zone that is inside a broad congestive area that developed after the Brexit referendum in 2016. The relatively directionless movement of the pair since then reflects the uncertainty about the EU-UK divorce.

EUR/GBP – Monthly Chart

Chart showing EUR/GBP

EUR/GBP chart created using TradingView

Looking ahead, if Brexit woes prevail and undermine confidence in the United Kingdom’s future, GBP will likely fall against its major counterparts and could be a key catalyst behind pushing EUR/GBP past resistance. However, traders may choose to remain neutral and not add exposure until more there is more political clarity.

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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