The EURGBP has continued to rally last week too, with breaking the key resistance 0.9100 marks. The cross has been moving higher for twelve straight weeks. The recent upmove from early May to till date is the biggest move (12 weeks) which has not recorded in the past two decades. The new profiles are consistent with a new uptrend in Q3.
Markets concerned about the no-deal Brexit on 31 October, which hurt the UK economy deeper. The new PM Mr. Johnson made it clear that the UK will leave the EU as scheduled on 31 October, with or without a deal.
Moody’s Analytics said, “A no-deal Brexit would be an unmitigated disaster for the country and something a sizable number of Tory MPs would like to avoid given the political fallout that would ensue.”
In last week’s note, UBS said: “ The market is now pricing a roughly 50% chance of a no-deal Brexit, based on our estimates.”.
The new GBP technical profiles are consistent bearish until end of 31 October.
Looking at the week ahead, it’s not a reasonably busy week. We believe this week’s BOE meeting is a non-event for GBP.
The euro cross is not halting their gains even after rising more than 7.50% to over 0.9100. The GBP declined the most since 2017 September as raised bets of a no-deal Brexit.
The erosion of important technical threshold at 0.9100 (double top pattern). The increase of the daily volatility and the bug signal on the daily oscillator also suggest further upside potential.
Against this setup, the EURGBP is likely to break above the next resistance at 0.9140 and eye 0.9200. A break of the latter would be needed to initiate strong recovering to 0.9300.
The supports stand at 0.9050, 0.9000, and 0.8890. As long as 0.8890 holds, watch out for new bullish targets.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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