BRITISH POUND, EURO, EUR/GBP PRICE FORECAST – TALKING POINTS
- British Pound outlook bearish ahead of BoE rate decision, Brexit
- A selloff in Sterling may propel EUR/GBP towards key resistance
- Bumpy road ahead for GBP as officials scramble for a trade deal
EUR/GBP TECHNICAL ANALYSIS
EUR/GBP may attempt to crack resistance at 0.8533 in the week ahead. Failure to do so may be met with disappointment and could cause discouraged EUR/GBP bulls to unload their positions. Selling pressure may abate around 0.8454 and the pair may then trade sideways within the 0.8597-0.8454 range again as they have since November 2019.
EUR/GBP – DAILY CHART
EUR/GBP chart created using TradingView
Conversely, if the pair break the ceiling with follow-through, it could open the door to testing a key range that has remained unchallenged since January 14, and December 25 before that. Both times, the pair retreated from resistance and resulted in a decline. A third capitulation could lead to an aggressive selloff. However, if EUR/GBP breaks it with confirmation, it could mark a tectonic shift in the pair’s short-term trajectory.
EUR/GBP – DAILY CHART
EUR/GBP chart created using TradingView
BRITISH POUND FUNDAMENTAL ANALYSIS
The British Pound may face selling pressure ahead of the Bank of England rate decision – even if rates are left unchanged. Overnight index swaps are currently pricing in a 50 percent chance that officials elect to cut rates by 25 basis points. The upcoming meeting on January 30 will also be Governor Mark Carney’s final chairing as head of the BoE. Therefore, his parting words may carry a premium to the extent that they impact markets.
Leading up to this decision, Mr. Carney along with a few officials have debated the merits of “near-term stimulus” in light of the UK’s growth-sapping political debacle. Unexpectedly dovish rhetoric could cause the British Pound to retreat as the UK prepares to officially depart from the EU on January 31. Growing doubt of the UK’s ability to ratify a trade deal before the December 31, 2020 deadline could further pressure GBP.
EUR/GBP TRADING RESOURCES
- Tune into Dimitri Zabelin’s webinar outlining geopolitical risks affecting markets in the week ahead !
- New to trading? See our free trading guides here !
- Get more trading resources by DailyFX !
--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitri on Twitter
