EURGBP, Daily
The last two weeks have been a tumult for the UK government with 10 members of the government resigning over the “Chequers” fix and as usual it is Sterling that suffers. This week the focus will remain on Brexit negotiations, which haven’t exactly been going swimmingly. Last week Prime Minister May’s fragile government only just managed to push through several bills on modifications to the newly-formed Brexit policy document, which will form the basis for negotiating with the EU. The European Commission stated last week that “everyone must now step up plans for all scenarios” ahead of March 29 next year, especially in the event of a no-deal exit. The pound is trading about 13-14% lower in trade-weighted terms since the vote to leave the EU back in June 2016, much of which represents the Brexit discount that market participants are demanding. Expectations are for this discount to persist. The charts do not lie.
All major Sterling crosses show a pressured pound. GBPUSD, although bid following the President’s thoughts on the FED on Friday remains under its key 20 day moving average and R1 at 1.3185. GBPJPY was over 149.00 last Monday (July 16) and today it trades south of the key 20, 50 and 200 day moving averages at 145.80. Next support is S2 at 145.62 and S3 at 145.30. EURGBP broke north of it’s 20 and 200 day moving average June 22 at 0.8790 and this key level has proved significant support in the rally to 0.8950. The 2018 high at 0.8968 remains a key resistance area with support now at 0.8900 and 0.8865.
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Stuart Cowell
Head Market Analyst
HotForex
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