- Summary:
- EUR to GBP exchange rate moves with a bearish tone as it threatens to fully retrace the recent bullish breakout. A move back below 0.89 is possible.
The EUR to GBP exchange rate hovers around the 0.90 level for quite some time now. Regardless of the developments in the Brexit negotiations, the cross pair cannot let go of the round number.
In fact, so far, the 0.90 proved to be a solid benchmark for the EURGBP cross. Any move above 0.90 in the years since the Brexit referendum came in the context of a no-deal outcome. Thus, bearish for the pound. At the same time, any news that a trade deal may be possible triggered a move below 0.90.
At this point, with two weeks ahead of the U.S. elections, the USD seals the faith of the EURGBP cross. If the EURUSD and GBPUSD positive correlation increases, the EURGBP will likely remain glued to the 0.90 level. However, the price action suggests a full reversal of the recent bullish break.
October PMI’s to Offer More Clues to the ECB
On Friday, the PMIs for the month of October will steal the show for Euro traders. The ECB already hinted that it stands ready to do more when it comes to quantitative easing, should the need arise.
Judging by the low inflation in the Euro area, the ECB will likely increase the pace of its purchases and will announce it at the December meeting. Until then, effective communication is key for market participants to understand the next steps.
Weaker PMIs this Friday will seal the deal for more QE to come. Hence, bearish Euro pairs.
EUR to GBP Technical Analysis
While many traders may interpret the chart below as a bullish flag, the risk is that the price action will fully reverse the bullish breakout. A bullish flag is a tricky pattern, especially if the flag corrects a lot into the territory of the previous break.
In this case, bearish traders may want to sell at the market and place a stop at 0.9150 while targeting 0.8950 for an appropriate risk-reward ratio.
EUR to GBP Price Forecast
