British pound weakness yesterday allowed the EUR to GBP exchange rate to rally to its trend line resistance on the daily time frame. By connecting the highs of October 24, November 7, and January 14, we can see that EURGBP is testing resistance at 0.8530. This price action was driven by pound weakness which was triggered by the UK’s hard-line stance in Brexit negotiations. Michael Gove said yesterday that the government would withdraw from talks if “good progress” are not made by June. Consequently, this was bullish for the EUR to GBP exchange rate because it raised concerns of a no-deal Brexit.
For today, a roster of economic reports are due from the euro zone which could affect EURGBP. At 7:45 am GMT, the French preliminary GDP report is eyed to come in at -0.1% for Q4 2019. Meanwhile, the country’s CPI report for February is eyed at 0.0%. Then at 8:55 am GMT, Germany’s unemployment change report for January is estimated at 4,000.
If euro zone data disappoints, the rally on the EUR to GBP exchange rate could run out of steam and we could see resistance at the trend line hold. Reversal candles may then indicate that EURGBP could drop to its recent lows around 0.8280.
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On the other hand, better-than-expected figures would be bullish for the currency pair. EURGBP has consolidated in the past few trading hours after surging up the charts. Consequently, a bullish flag chart pattern has formed. This is considered as a bullish continuation pattern. A break above yesterday’s high at 0.8541 could mean that the currency pair still has room to trade higher. The next resistance level could be at 0.8595 where EURGBP topped on January 14. If it does not hold, the next resistance level could be at 0.8990 where the currency pair topped on October 9.