A bearish ‘Death Cross’ has formed on the EUR/GBP daily chart. The pattern is defined by the 50 period moving average crossing below the 200 period moving average. In addition, the pair broke out of a bearish pennant pattern.
The recent bearish action in the pair was largely news driven. On Monday, EUR/GBP fell to a six-month low, after Nigel Farage said that the Brexit Party will not contest any seats held by the Conservative Party in the UK’s December 12th election. The news lifted the odds of UK Prime Minister Boris Johnson’s success and he reacted with the statement;
"We welcome Nigel Farage's recognition that another gridlocked hung Parliament is the greatest threat to getting Brexit done."
Ian Lavery of the opposition Labour Party fired back, citing a threat to the National Health Service (NHS):
"This is a Nigel Farage and Boris Johnson alliance with Donald Trump to sell out our country and send £500 million per week from our NHS to US drugs companies."
A Conservative Party majority would likely be a bullish outcome for sterling, as the market views that result as the most likely to lead to a resolution of the uncertainty surrounding Brexit.
Investors now keenly await President Donald Trump’s speech on US/China trade, scheduled to take place at the Economic Club of New York at lunchtime on Tuesday. Uncertainty over the trade talks weighed on the markets on Monday, after President Trump said over the weekend that there had been incorrect reporting about US willingness to lift tariffs.
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