EURGBP spent yesterday’s trading in a 54-pip consolidation as markets await for more significant developments on the EU-UK Brexit negotiations. The currency pair bounced between support at 0.8865 and resistance at 0.8920. By the end of the New York session close, EURGBP was 7 pips below its opening price at 0.8898.
The latest news to come out on Brexit negotiations is that the EU opened up the possibility of extending the deadline of a deal by 2 more years. In the past, the UK has been stern on finishing talks by the end of this year. It will be interesting to see if UK Prime Minister Johnson’s stance has changed when a summary for this week’s talks is released on Friday.
Later today, there are a few reports which could move EURGBP. At 8:55 am GMT, Germany’s unemployment change for April is expected to print at 188,000. Then at 9:30 am GMT, the UK’s final services PMI for May is seen to print 27.9. Higher unemployment in the euro zone’s largest economy would be bearish for EURGBP. Meanwhile, disappointing UK data could fuel an uptick on the currency pair.
On the 4-hour time frame, it can be seen that EURGBP is testing support at the rising trendline (when you connect the lows of May 5, May 6, May 7, and May 11). This could mean that buyers are looking to push the currency pair higher. A strong close above the 100 SMA (blue line) may confirm this bias. Should it happen, EURGBP could soon rally to its May 29 highs around 0.9042.
On the other hand, it’s worth pointing out that the currency pair has been consolidating after a sharp drop. Consequently, a bearish flag chart pattern has formed. When you enroll in our free forex trading course, you will learn that this is considered as a bearish continuation pattern. A strong bearish close below yesterday’s low at 0.8865 could be considered a downside break. It may also invalidate support at the rising trendline. If this turns out to be the case, EURGBP could soon fall to its May 7 lows at the 0.8700 handle.