EUR/GBP: Takes out R3, eyes 61.8% of late Aug - recent Oct low retracement at 0.8951
- EUR/GBP is making tracks to the upside while the pound is falling to the wayside ongoing Brexit concerns as we head towards the BoE this week.
- EUR/GBP is taking on R3 supported by the 4hr 10 & 21 SMAs on pullbacks within the rising trend and channel breakout - Eyes to 23.6% Fibo of April lows- Aug highs at 0.8984 and 61.8% of late Aug - recent Oct low retracement 0.8951.
While Brexit is a weight on the pound, so too are politics on mainland Europea with the Italian debt see as a cause of concern to the whole eurozone according to the EU Commision.
"Actual stagnation in Italy, Q3 GDP at 0%, reinforces the 5 Star/League insistence on a 2.4% budget deficit to lift Italy out of incipient recession. How will the EU insistence on restraint play with the Italian electorate?" -
Joseph Trevisani, Senior Analyst at FXStreet.
However, there is more focus on Brexit in the market and any hope that PM May can somehow succeed in a Brexit agreement pushing through Parliament with her party so divided seems almost far-fetched. Sticking issues relating to the Irish border remain up in the air and no solution has been found since the European Council Meeting on 17–18 October. The next EU Council meeting will be held on 13–14 December.
UK to face rating downgrades
The S&P rating agency has said that a no deal Brexit could push the UK into a recession lasting 4-5 quarters with GDP contracting by 1.% n 2019 and 1.5% in 2020 - and ultimately harm some credit ratings.
EUR/GBP levels
Analysts at Commerzbank noted that EUR/GBP’s recovery off the 0.8723 Fibonacci retracement is eroding stronger resistance offered by the 55-day ma at .8901 and the resistance line at 0.8888:
"We will wait to see if this fledgeling break higher is sustained and wait to see if the market CLOSES above this key resistance. The .8723 Fibo retracement guards the 8700/.8697 June low. Failure at .8697 would target the 0.8620 2018 low."
Meanwhile, while holding in bullish territory and above the 21-D SMA, bulls can target the 23.6% Fibo of April lows- Aug highs at 0.8984 ahead of 61.8% of late Aug - recent Oct low retracement to 0.8951.