EURGBP has spent the past six trading days trading around its three-month highs. Since June 18, the currency pair has been testing support around 0.9020 and resistance at 0.9076. This has been the highest level where EURGBP has traded since March 2020. Could recent Brexit developments push the currency pair lower?
Yesterday, the European Union hinted that it was willing to find a common ground with the UK in setting more favorable conditions for British businesses after Brexit. In the past, the EU was keen on making sure there was a level playing field which would ensure that fair competition would be promoted among businesses.
Continued development towards having a Brexit deal would be bearish for EURGBP because it would limit the risks posed by Brexit to the UK economy. On the other hand, a no-deal Brexit could prove to be bullish for EURGBP.
On the 4-hour time frame, it can be seen that the currency pair has recently been making lower highs after making higher highs. Consequently, a head and shoulders pattern has formed. When you enroll in our free forex trading course, you will learn that this is widely considered as a bearish reversal indicator.
A strong close below yesterday’s low at 0.9000 could mean that there are sellers in the market. EURGBP could soon fall to near-term support at 0.8975. This price coincides with the 61.8% Fib level (when drawing the Fibonacci retracement tool from the low of June 16 to the high of June 23). It also coincides with the rising trendline when you connect the lows of April 30, May 6, May 11, June 9, and June 16.
On the other hand, if there are enough buyers in the market today, we could see support around the 38.2% Fib level hold. Should this happen, EURGBP may soon retest its highs at 0.9077.