EUR/GBP: downtrend pauses but remains intact
EUR/GBP is likely to resume its move lower in the medium term as a no-deal Brexit looks increasingly unlikely. The pair is an accurate reflection of Brexit market sentiment.
EUR/GBP traders continue to price out no-deal Brexit
The sharp fall in EUR/GBP seen over the last five weeks has paused a fraction away from lows seen nearly three months ago as traders continue to price out the option of the UK leaving the European Union (EU) without a deal. While nothing is straightforward where Brexit is concerned, moves and commentary from both sides suggest that there is more urgency towards finding a common ground. EUR/GBP is the market’s ‘Brexit Play’ and will remain so going forward.
Over the previous weeks, UK prime minister Boris Johnson has changed his tune marginally from previously bullish statements saying that the UK is leaving the EU on 31 October deal or no-deal, to a marginally more consolidatory stance saying that a deal is his preferred option. The EU also remain firm in their stance but have also hinted that while concessions may be found to bring both sides together, the current withdrawal agreement will not be changed.
EUR/GBP the cleanest currency pair to trade Brexit
To this end the EU and UK recently announced that they would be increasing the frequency of their meetings and would be talking daily to try and flesh out a way forward. While 31 October remains the final deadline for Brexit, if a deal is to be reached then its needs to be presented to the European Council at their meeting in Brussels on 17-18 October at the latest.
The cleanest pair to trade Brexit is EUR/GBP and recent market moves suggest that a no-deal Brexit is starting to be priced out of the market. A look at the EUR/GBP chart shows the pair falling for the last six weeks from a near three-year high at £0.9325, as EU-UK talks intensify.
EUR/GBP likely to fall further on positive Brexit negotiations
If Brexit negotiations take a positive turn, and no-deal exit is taken off the table for good, EUR/GBP is likely to fall further. The chart shows that EUR/GBP has retraced more than 50% of the early March to mid August rally and continues to head lower. Initial support for the pair comes from the 200-day moving average, currently at £0.8825, before the 61.8% Fibonacci retracement level at £0.8798 comes into play. A clean break and close below here would open a larger move all the way back to the start of this year’s rally at £0.8472. The chart also shows a bearish sequence of lower highs and lower lows off the 12 August high, while the pair are also below both the 20-day moving average and 50-day moving average, adding to bearish momentum.
In the event of the UK leaving the EU without a deal – hard Brexit – then the recent £0.9325 high will be tested quickly and may not hold.
EUR/GBP daily price chart (February – 19 September 2019)
The information 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 Bank S.A. 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 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. See full non-independent research disclaimer.
Start trading forex today
Find opportunity on the world’s most-traded – and most-volatile – financial market
- Trade spreads from just 0.6 points on EUR/USD
- Analyse with clear, fast charts
- Speculate wherever you are with our intuitive mobile apps
See an FX opportunity?
Try a risk-free trade in your demo account, and see whether you’re onto something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See an FX opportunity?
Don’t miss your chance – upgrade to a live account to take advantage.
- Get spreads from just 0.6 points on popular pairs
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See an FX opportunity?
Don’t miss your chance. Log in to take your position.
Live prices on most popular markets
You might be interested in…
Find out what charges your trades could incur with our transparent fee structure.
Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.
Stay on top of upcoming market-moving events with our customisable economic calendar.