EUR/GBP: Bears awaiting a key event for the euro this week
|- EUR/GBP has continued to edge lower since accumulating a critical mass of shorts.
- The bears are attempting a third test of the key 0.9090 level.
EUR/GBP has continued to edge lower since accumulating a critical mass of shorts in recent sessions to give the pair a bearish bias on the charts again. Currently, EUR/GBP is down -0,14% having travelled lower from 0.9183 to a low of 0.9099, testing the waters below 0.91 the figure for the first time since last week's sell-off in the euro and Friday's low down at 0.9090.
The catalysts in the moves have derived from the expectations of a deeper rate cut from the European Central Bank when they meet next week and the prospects of some traction towards a Brexit deal between the UK and the EU. News today hit the wires that
German Chancellor Angela Merkel said that the EU will remain united in its approach to Brexit and added that they will think about practical solutions to the Irish backstop problem, per Reuters.
"Britain needs to decide which way it goes, we have made our offer to work closely," Merkel noted. Further commenting on the backstop issue, Merkel said that it is a question of the political declaration on future ties, not of the Withdrawal Agreement. The pound rallied on the news which weighed in on the cross, sending it from the top side of the handle to the lower boundaries.
The week ahead could be critical for the euro
For the week ahead, there are a number of risks for the euro. If the Dollar gets a boost from either of the two scheduled Federal Reserve related events (FOMC minutes and Jackson Hole) and should EZ PMIs come in as the disappointment that the market expects, following the recent Consumer Price Index miss, the EUR/GBP will likely continue in its southerly trajectory in the absence of anything too negative Brexit related - (The risks to such a view or short position in EUR/GBP would come in an upside surprise in the Eurozone flash PMI’s, (which should come in lower following the weakness in ZEW surveys) or even that Germany comes out an announces an early fiscal expansion).
EUR/GBP levels
The bears are attempting a third test of the 0.9090 level which is backed-up by the rising 200 4-hour moving average - an area of confluence which proved critical at the turn of 2018 to the topside, (and August 2018), forcing a protracted sell-off of more than 500 pips.
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