Movement on EURGBP was limited in yesterday’s trading between support at 0.8979 and resistance at 0.9008. This was despite a warning from German Chancellor and now EU President Angela Merkel that a no-deal Brexit could be on the horizon. As of this trading, EURGBP is up at 0.8995 after opening the day at 0.8984. However, technicals suggest that the currency pair has more downside potential ahead.
In a statement, Chancellor Merkel said that negotiations between the EU and the UK could fail. With this, she challenged both parties to be ready for such an outcome. She made the statement as she took on the EU presidency in which heads of state take turns with every six months.
Her remarks also come at a time when UK and EU negotiators are in the process of sorting out details of how the two parties would interact with each other post-Brexit. The deadline for an agreement is set on December 31, 2020.
On the 4-hour time frame, it can be seen that EURGBP has been making lower highs after a series of 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 pattern. The currency pair has already broken the neckline support at 0.9004. This could indicate that EURGBP may soon be headed to its June 9 lows at 0.8870. On top of this, it is also apparent that the currency pair has slid below its trendline support.
It is, however, worth pointing out that EURGBP is currently testing support at the 200 SMA. Reversal candlesticks have already formed which could suggest that there may still be buyers in the market. If this turns out to be the case, we could soon see the currency pair retest its previous trendline at 0.9030 where it could find resistance.
EURGBP, 4-hour Chart