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EUR/GBP: euro-pound sterling positioning as Brexit talks resume

EUR/GBP retail FX trader positioning has turned less net short over recent sessions with Brexit talks due to resume this week.

EUR/GBP price outlook

  • EUR/GBP price action has gyrated sideways within a rough 200-pip trading range recently
  • Brexit talks scheduled to resume this week could spark volatility in the euro and pound sterling
  • EUR/GBP retail FX trader positioning has turned less net short over recent sessions

EUR/GBP price action might be ripe for heightened market activity this week as Brexit talks resume between EU/UK trade negotiators. Evidence of this is already being indicated by big shifts in EUR/GBP trader positioning according to recent IG client sentiment (IGCS) data.

IG client sentiment: EUR/GBP daily price chart (August 2019 to August 2020)

EUR/GBP sentiment has turned less bearish over the last several trading sessions, but is now roughly mixed on balance at 45% net long. Retail FX traders have not only increased EUR/GBP net long positioning by 17% over the last week, they have also unwound net short positioning by 8% during the same time frame. Fluctuations in EUR/GBP positioning has resulted in a net 3% increase in open interest.

We typically take a contrarian view to crowd sentiment, and the fact that majority of traders remain net short suggests EUR/GBP may continue to rise, but recent changes in positioning warns that the current price trend may soon reverse lower.

EUR/GBP daily price chart (3 March 2020 to 19 August 2020)

The EUR/GBP is now hovering comfortably above the £0.9 price zone as EUR/GBP coils between its series of lower highs and higher lows since June. There could be potential for EUR/GBP price action to continue bouncing back and forth between these recently defined technical barriers. Spot EUR/GBP is perched below its 50-day moving average (MA) at the time of writing, however, and might indicate EUR/GBP bears are currently in control.

Topping this level, which is also underpinned by month-to-date highs, might suggest a shift in bias tilted to the upside. Perhaps this could open the door for a test of the declining trendline and July swing highs. On the other hand, breaching technical support provided by the £0.9 handle could motivate EUR/GBP bears to make a larger push lower toward the 23.6% Fibonacci retracement highlighted on the chart above.

This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. Any research provided should be considered as promotional and was prepared in accordance with CFTC 1.71 and designed to promote the independence of investment research. See our Summary Conflicts Policy, available on our website.

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