EUR/GBP to 85 Cents?

EUR/GBP to 85 Cents?

EUR/GBP to 85 Cents?

From a fundamental and technical basis, we believe EUR/GBP is headed much lower. Economic data from both parts of Europe has been mixed but the greater near term political risks lie in the Eurozone. Brexit was this summer’s obsession and as winter comes, the fear and uncertainty has shifted to the Eurozone. Brexit isn’t going away but it will be months and possibly even years before it poses a major risk to the U.K. economy. In the meantime, healthy UK consumer spending numbers and the high chance of the U.K. Supreme Court voting in favor of Parliament on Article 50 makes the outlook for GBP less grim. Meanwhile elections and referendums in the Eurozone are coming up quickly and rising nationalism is becoming a serious risk for the region. If Italy rejects Senate reform in early December or France’s far-right candidate Marine Le Pin starts to rise in the polls ahead of next year’s election, we could be talking about an Fr-exit or Ital-exit.

Technically, EUR/GBP has spent the last few days hovering below the 100-day SMA and is now trading right near the 38.2% Fib retracement of the 2008 to 2009 rally near 0.8560. While this level is important, 0.8530 is still resistance. As long as it holds, EUR/GBP should be on its way to down to 85 and possibly even 84 cents.

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