EURGBP erased the initial losses it incurred on news that European leaders have agreed to a coronavirus rescue package. The currency pair had bounced off from its intraday lows at 0.9000 and closed at 0.9050. As of this writing, EURGBP has extended its gains as it trades around 0.9067. This follows after rumors broke that the EU and UK are closer to a no-deal Brexit than coming to a compromise.
As reported by my colleague Mircea Vasiu yesterday, European leaders agreed on how to spend the $2.1 trillion budget to support the economy amid the pandemic. There were some friction from “frugal” countries (the Netherlands, Sweden, Austria, Denmark, and Finland) who argued that majority of the funds should be issued as loans; not grants. As a compromise, the amount of grants available was trimmed down to $358 billion. The “frugal four”will also be entitled to millions in rebates for their contributions to the budget.
Meanwhile, today, the Telegraph reported that the UK is “close to abandoning hope of a Brexit trade deal.” UK Prime Minister Boris Johnson is scheduled to announce an outline of the country’s agreement with the European Union. However, according to some ministers, this may not be possible for the July deadline.
On the daily time frame, it can be seen that EURGBP has formed a hammer candlestick yesterday. When you enroll in our free forex trading course, you will learn that this is widely considered as a bullish confirmation signal. If this turns out to be true, EURGBP could retest its previous trendline for resistance around 0.9140. A strong close above this price could mean that the currency pair may continue trading higher to 0.9174 where it topped on June 29.
On the other hand, a strong close below yesterday’s low could imply that there are still sellers in the market. EURGBP could them fall to its initial support at 0.8937 where it bottomed on July 10. If support at this price does not hold, EURGBP could fall lower to 0.8910 where it could test the 100 SMA for support.
EURGBP, Daily Chart