Boris Johnson
An important week for the EUR to GBP exchange rate is undergoing as the E.U. Summit kickstarts today. While most of the outcome is already priced in by the markets, we have seen yesterday how a few headlines can change everything.
For example, the GBP suffered until yesterday due to the E.U. already drafting the document to be released as a Summit conclusion. Nothing new in that document when compared to what the market already knew – that the E.U. started the infringement procedures and that it hopes the U.K. does something about it.
Just when the EUR to GBP exchange rate traded above 0.91, or the GBPUSD below 1.29, the U.K. signaled its willingness to sit back at the negotiations table. More precisely, the U.K. said that it is not going away from negotiations (immediately). In an instant, the EUR to GBP reversed course, dropping over a hundred pips to find support at the pivotal 0.90 level.
The European Commission President Ursula von der Leyen also expressed optimism that a fair deal will be reached. In a tweet, she mentioned the willingness of the E.U. to continue discussions. However, she also warned that there is still a lot of work ahead.
One thing that strikes the eye on the EURGBP pair is a contracting triangle forming for more than six months now. The recent price action broke the a-c trendline, in a move that tells us that the market forms a non-liming pattern.
Such patterns appear at the end of complex corrections. Moreover, by the time the price breaks the a-c trendline, it does so as part of the e-wave – the last segment of the triangle. Furthermore, the e-wave tends to consolidate into the timezone given by the apex of the contracting triangle.
Aggressive bears may want to short at market with 0.9160 as a stop-loss and a move well below the apex’s value at 0.8900.
