Boris Johnson
The EUR to GBP exchange rate continues to be a key driver in both the EURUSD and the GBPUSD major pairs. Ever since the Brexit referendum in 2016, the pair was not able to deviate significantly from the 0.90 level.
However, 2020 did bring something new. After the European Commission announced its plans to issue common debt, the market welcomed the decision and interpreted it as a new step towards further European integration.
As such, the EURGBP cross pair made a new high in 2020, when compared to the 2016 Brexit referendum high. In fact, the 2020 high represents the third higher high the market posted – suggesting a triangular pattern is in place.
Naturally, the focus shifts now to when the triangle breaks? The three higher highs suggest a reversal pattern, so bears watching closely.
Despite the Eurozone lockdowns due to the second COVID-19 wave, the high unemployment, and gloomy Q4 forecast, the Euro remains bid all over the board. It trades with a bid tone against the USD, the GBP, and even the JPY, one of the strongest currencies during the pandemic.
Brexit negotiations did not help the EUR GBP bears. Neither did the recent Bank of England increase in the quantitative easing program.
But the 0.90 level should give way sooner rather than later, considering that more ECB easing is in the pipeline.
The technical picture below shows the price action around the pivotal 0.90. Every market move above the level suggested a no-deal Brexit, while below, a possible deal was in the cards. But a closer look suggests the price barely holds above 0.90. On a break below the rising trendline, bears may want to go short on a daily close below 0.8975 and place a top at 0.9150. For the take profit, the appropriate way to set it is by using a 1:2 risk-reward ratio.
