EUR/GBP: Bulls take charge following heightened expectations of a 'Cliff-Edge Brexit'

EUR/GBP's ATR has picked up on the move today following a series of sessions of dull price action. Traders had been sitting on their hands following the latest milestone whereby PM May achieved approval from the EU on the Brexit deal of which she will now face her toughest challenge in trying to have UK Parliament sign off on it. Markets are highly sceptical that the Commons will approve the deal on the 11th December considering the number of MPs who have already said they will not back her draft plan.

BoE governor Carney made his presentation of the Financial Stability Report

• BoE's Carney: UK not fully prepared for a cliff-edge Brexit

In the meantime, the cross was in play following BoE governor Carney making his presentation of the Financial Stability Report and Brexit analyses. The BoE's worst case Brexit scenario would lead to an 8% fall in GDP in the short term, unemployment of 7.5%, inflation at 6.5%, house prices down 30% and a 25% fall in the pound - (At current rates,0.8860, that would put EUR/GBP above parity to 1.1075 or GBP/EUR at 0.9029). Carney has emphasised that the UK is not fully prepared for a Cliff Edge (no deal) Brexit and that the UK needs a Brexit transition period. 

EUR/GBP levels

• Support levels: 0.8843, 0.8821 and 0.8799.
• Resistance levels: 0.8887, 0.8909 and 0.8931.

Technicals and price action are aligned bullish, (longer downside wicks on the Japanese candlesticks, bullish DMIs and positive daily RSI). Bulls need to get over the 0.8890 barriers as R2 before R3 at 0.8931 that guards 0.8941 and July peaks at 0.8960; Strong resistance there is expected to cap rallies. To the downside, the July low at 0.8799 and the November 12 high at 0.8774 guards the October lows at 0.8723.