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Euro Outlook: EUR/GBP May Reverse Losses if Brexit Hopes Evaporate

Euro Outlook: EUR/GBP May Reverse Losses if Brexit Hopes Evaporate

2019-10-16 04:00:00
Dimitri Zabelin, Analyst
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Euro Outlook, EUR/GBP, Brexit – TALKING POINTS

  • EUR/GBP plunges to multi-month laws as Brexit hopes boost Sterling
  • Starting at the end of last week, EUR/GBP has fallen over three percent
  • Will the fickle nature of Brexit cause reversal, erase this week’s losses?

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

EUR/GBP may reverse some of its catastrophic losses if hopes for an orderly Brexit evaporate; and with it, the upside force behind Sterling’s rise. Since October 10, EUR/GBP has declined almost four percent as renewed hopes for an orderly Brexit spurred investor confidence and sent Sterling higher against all its major counterparts.

EUR/GBP is now hovering below the 0.8652-0.8682 range – former support now-turned resistance – after crashing through several floors in just a matter of days. If downside momentum continues, the next levels of support may be the 0.8572-0.8593 inflection zone. A break below the lower lip may prompt traders to pile on their short bets as the pair then aim to test formidable support at 0.8491.

EUR/GBP – Daily Chart

Chart showing EUR/GBP

EUR/GBP chart created using TradingView

Having said that, the fickle forces that are pushing the British Pound higher are more than capable of tearing it down. As I have previously re-iterated in my other weekly forecasts, analyzing GBP crosses is very difficult because it is tied to a fundamentally-volatile environment. As such, “There is no telling when a sudden political development will cross the headlines and what the respective magnitude of the price swing will be”.

Just last week, the EUR/GBP erased over 20-days’ worth of gains in a period of 24 hours. These same forces are perfectly capable of reversing the pair’s losses. For now, the British Pound’s rise is being propped up by ethereal optimism over the prospect of achieving an orderly Brexit. If this sentiment changes, however, EUR/GBP could spike and seek to re-test resistance at 0.8786.

EUR/GBP – Daily Chart

Chart showing EUR/GBP

EUR/GBP chart created using TradingView

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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