EUR/GBP: bears rejected but stay in control within descending channel, targets below 0.8723 fibo
|- EUR/GBP has dropped from the top of the bearish channel's resistance from around the pivot and has made an ambitious attempt at closing below S3 where the price was rejected, (0.8752), and sent back to the recent 0.8789 high just above the 4hr 21-SMA and well en route back to S1 again.
It is set to be a volatile week for the cross given the Italian budget shenanigans ad indeed the Brexit saga. Firstly, the weekend news was not so positive for Brexiteers and indeed it seems that May is playing into the hands of the EU, unable to convince her counterparts in Brussels so far.
However, it appears that the consensus of market forecasters remains that a trade deal will be agreed between the UK and the EU before the start of Brexit next March:
"It has been signalled that an EU summit in November will be a crucial milestone for that trade agreement. That said, this summit may not happen if enough process on a deal is deemed not to have been made by tomorrow evening’s summit. At is stands, the topic of the Northern Ireland border remains the main stumbling block and the issue remains just as much a conundrum as it appeared at the start of the Brexit talks. If by the end of November the outline of trade deal is still not in place, it is possible that the consensus of forecasters will start to shift towards a ‘no deal’ outcome,"
analysts at Rabobank explained.
With respect to the Italian budget, the risk there lies in the hands of the European Commission who is expected to reject the plans and request revisions within two weeks which will not be received well by markets.
The UK Telegraph was reporting yesterday that “nervous Italians are starting to funnel money across the border into Switzerland, worried that an epic clash with the EU could set off a Greek-style banking crisis and a slide towards default.”
EUR/GBP levels
Analysts at Commerzbank noted that EUR/GBP continues to recover off the 0.8723 Fibonacci retracement which guards the 8700/.8697 June low:
"This rebound is viewed as corrective only and failure here would target the 0.8620 2018 low. Near term rallies will find initial resistance at .8835 200 day ma ahead of .8918 the 55 day ma and will now stay offered below here. The Elliott wave count is implying that the rebound will falter at .8835/65."
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