Fundamental outlook

In this week, we analyze the exchange rate EURGBP in the JRC Capital Management Weekly Outlook.

As time gets tighter, the British Prime Minister Theresa May has to suffer from another defeat in the House of Commons. Next week, Theresa May will hold further talks with EU leaders and will insist that her defeat does not change her belief that her Brexit Deal will be accepted by the Parliament. The 29th of March is the date when Great Britain is supposed to leave the EU – with or without a deal. The uncertainty is also reflected in the EURGBP exchange rate. The British pound was able to gain in value after the ECB reduced its economic outlook. However, the recent news about the Brexit led to a recovery in the EURGBP.

Next Monday, the US-Markets will remain closed due to the President’s Day, also known as George Washington’s Birthday. That means that there will be less liquidity available and hence, increased risk of abrupt moves. Apart from that, we expect relatively few, yet important, economic data. On Tuesday, the ZEW will publish its Survey for the German and European Economy. On Friday, the euro zone consumer price index will be published. A very important indicator for the monetary policy of the European Central Bank.

Technical analysis

Trend indicationResistance / Support
Short Term (daily)bullishResistance 10.8850
Medium Term (weekly)neutralResistance 20.8950
Long Term (monthly)neutralSupport 10.8700
Support 20.8618
Recovery in the EURGBP - Brexit gets closer - EURGBP Chart

At the beginning of the year, the euro lost in value. However, now we can see a recovery. The ATR-indicator shows clearly how volatility decreased in recent weeks. This could be a sign that the bulls might lose power. In general, the EURGBP is an exchange rate with a low volatility. However, an average candle size of less than 60 pips is uncommon. Due to the tense political situation, the EURGBP has been moving sideways for a while now. Since September 2017, the price is moving in a narrow range between 0.8600 and 0.9100. Currently, the price for one euro is 0.8765 British pound.

At the lower side, we can identify important support areas at 0.8700, the price changed direction several times in this area, and 0.8618, the low of the year.

If the recovery continues, the first resistance is located at 0.8850. Several highs and lows are located in this area. At 0.8950, we can localize another important resistance.