EUR/GBP: Brexit looks ugly, pound hangs in the balance
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- EUR/GBP has been consolidating the Asian bull gap on Monday as the pound hangs in the balance of Brexit on a crucial week for sterling.
- 27 EU member states will vote on Brexit this Thursday which could possibly send the UK out of the EU without a Brexit deal by April 2019.
- EUR/GBP is currently trading at 0.8805, below the highs of 0.8826 and idles just above the lows of 0.8795.
EUR/GBP recovered from the lows of 0.8723 last week and has been steadily climbing within an ascending channel, printing 0.8825 in Asia on weekend headlines that superseded any recent positive Brexit sentiment. Last week, there were rolling headlines that diplomats had been told a deal was agreed by negotiators only for it to unravel amid continuing talks.
EU's Tusk: Must prepare for a no-deal scenario, which is more likely than ever before
Yesterday, Brexit Secretary of State Dominic Raab had to make an emergency meeting with EU chief negotiator Michel Barnier whereby the tone of negotiations has drastically changed ahead of this Thursday's EU summit where PM May will have her last chance to sell her proposals ahead of a 27 EU member vote the following day that could technically rule out the extension of a special Brexit summit in November - This would effectively leave the UK without a trade deal in March 2019 which is something that experts have warned would be a catastrophe for the UK economy.
"It is probably necessary for both sides in the Brexit talks to make a serious run at preparations for a 'no deal' exit, before sufficient pressure for a deal can be generated. The ugliness of a naked exit must be plain before the alternative can be found,"
Joseph Trevisani, Senior Analyst at FXStreet argued.
EUR/GBP levels
Analysts at Commerzbank noted that EUR/GBP last week sold off to and bounced from 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 .8620 2018 low. Near-term rallies will find initial resistance at .8836 200 day ma ahead of .8920 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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