Senior Analyst at Danske Bank Mikael Milhoj expects the European cross to slip back towards the 0.8700 area ahead of the BoE meeting next month.
“In the majors, EUR/GBP bounced above 0.90 yesterday on stop-loss driven price actions triggered by comments from EU’s chief negotiator Michel Barnier saying that "no great steps forward" in Brexit negotiations”.
“According to the IMM data speculative accounts have added substantial amount of long GBP positions in recent weeks, and it seems that some investors were caught on the wrong foot yesterday. In our view, the sell-off in GBP was overdone as it was expected that more negotiations is needed in November and early December”.
“Yesterday afternoon it fell back again and is trading at 0.892 currently after a story that EU might tell Barnier to begin preparing for discussions on a transitional deal”.
“From a risk/reward perspective, we see value in selling EUR/GBP above 0.8950 via a bearish seagull, for move towards 0.87 going into the BoE meeting on 2 November”.
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