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Double Top on EURGBP Ahead of Bank of England

GBPUSD Boris Johnson ftse
Boris Johnson

The EURGBP pair formed a possible double top at the 0.91 area before falling back to the psychological 0.90. The cross, which reflects the EUR to GBP exchange rate, is closely monitored in light of the Brexit negotiations and the future of the EU and the United Kingdom’s relationship.

For those closely watching the EUR to GBP exchange rate, something strange is obvious. It consolidated around the 0.90 level, despite important economic data out of the U.K. and the Eurozone.

One reason for the tight ranges may be the USD. As a cross, the EURGBP cross moves based on differences between the two major pairs it represents – the EURUSD and the GBPUSD. In other words, if the EURUSD rises 1% and GBPUSD rises by a similar amount, the cross, the EURGBP, remains flat.

Hence, a tight, direct correlation between the two majors always results in a cross that remains flat. Or, simply put – it consolidates.

Round 6 of the Negotiations Ended

The United Kingdom and the European Union still try to make the most of the Brexit decision. The aim is to reach a fair partnership with the transition period ending December 31st, 2020.

A new round of negotiations, the sixth one, just ended July 23rd. Discussions focused on the European Court of Justice’s role in the United Kingdom, if any, and the agreement of fisheries. However, despite less than six months away from the end of the transition period, no visible progress is made – yet the work is ongoing.

EURGBP Possible Double Top Formation

The EURGBP cross put a double top formation around 0.9150. The pattern, a reversal one, resembles the letter M and its measured move points to 0.88.

To trade it, though, one must wait for the price to clear the 0.90 level. So far, it found support every time it tested it.

As such, wait for the price to break 0.8970 before going short. Place a stop-loss at 0.9070 and target 0.88 for a 1:1.5 risk-reward ratio. While the risk-reward ratio is not that great, it reflects the slow progress in the negotiations between the two countries.

EURGBP Price Forecast