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Will the ECB push EUR/GBP below 0.7700?

GBP bulls have been trapped by uncertainty of a possible Brexit

CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
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The Euro has benefited greatly from market turmoil since December 2015. From an exchange rate of 0.7000 it climbed 929 points to 0.7929. Since it’s peak almost two weeks ago we have seen it come down to test 0.7700 twice. For over a month now, we have stayed above 0.7700 testing this level 4 times in total followed by significant bounces of 100 – 200 pips.

Today is D-Day for this currency pair. Will Mario Draghi disappoint or surprise the markets?

A surprise could see the pair push lower and through the strong support at 0.7700. However, how long will such a move last? GBP bulls have been trapped by uncertainty of a possible Brexit. Hence, today a drop in the Euro may well be short lived. If Draghi disappoints again, the exchange pair can still rely on Brexit pressures. However, a positive surprise could accelerate moves towards 0.8000.

Traders looking to position themselves ahead of the decision will do one of two things.

Bulls will place trades with profit targets at 0.7930 or 0.8000 and try to protect their positions with tight stop losses just below support at 0.7700 with room to breeze of about 30-40 pips to prohibit being taken out by a fake breakout. 

Bears, on the other hand, need to be much more careful in positioning themselves and may look at shorter trading opportunities due to the reasons mentioned above.

Volatility is ensured for this pair and could see seasoned traders wait for the decision to profit from better entry opportunities. This depends entirely on your trading style and strategy and their suitability for trading in volatile markets.

Whatever your view may be, today will be one of the most significant days until June 23rd (Brexit vote) for this pair and therefore could show us the direction for the next three month.

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.  Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. 

CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.