The EURGBP looks braced for more upside as the Pound struggles to delays in Brexit negotiations over Northern Ireland. The British Pound had already been underperforming the Euro this week before the recent setbacks.
The Telegraph came out with the downbeat updates surrounding the Brexit deal while citing the Democratic Unionist Party’s (DUP) dissatisfaction with the parts of the previously hailed EU-UK departure terms over the Northern Ireland Protocol.
The newspaper said “Sammy Wilson, the Unionist party’s Brexit spokesman in the Commons, suggested that parts of the Windsor Framework do not tally with what the Prime Minister has said in public.”
Goldman Sachs has also helped the EURGBP pair, as they expected the European Central Bank to raise its rate by 25 basis points in May but has revised this to +50 basis points in a research note. The bank now forecasts peak by the European Central Bank to 3.75% by June.
Also, he Financial Times came out with a survey saying that about two-thirds of UK businesses believe that government plans to disentangle British and EU law will cause more uncertainty and will not increase economic growth.
Going forward, the 0.9000 level has been a real sticking point for the EURGBP pair. Technically the EURGBP does not look great, we also have to remember the Ukraine situation.
Sentiment metrics are highly suggesting that more upside is likely as the majority of traders are stacked short against the EURGBP pair.
The ActivTrader platform shows that bearish sentiment is quite high, with some 74 percent of traders now expecting more downside in the EURGBP pair despite the recent rise towards the 0.8900 level.
Overall, this is still bullish for the EURGBP pair because traders are typically on the wrong side of the trade. Most of the time fading retail sentiment works well for trading purposes.
EURGBP Short-term Technical Analysis
The four-hour time frame shows that the EURGBP pair is technically bullish over the short-term with the price trading under its key 200-period moving average, around the 0.8830 area.
Looking at bearish patterns, a large head and shoulders pattern has formed after the recent rejection. This could also hint at a restest of that very important 0.8720 technical area.
EURGBP Medium-term Technical Analysis
The daily time frame shows that the EURGBP pair has recently failed at the upper end of its daily range and has now formed a huge head and shoulders price pattern.
According to the trendline analysis the EURGBP pair is being drawn like a magnet to the 0.8900 level, as this is the location of the EURGBP pair to move higher to 0.9000 or reverse towards the 0.8700 area.