EURUSD
One of the slowest currency pairs during the pandemic was the EURGBP. The EUR to GBP exchange rate hovers around the 0.90 level for many months now, lacking any kind of direction.
The price action in cross pairs (i.e. pairs that do not have the USD in their componence) is usually slower than in major ones. The consolidation takes even longer when the market reaches round numbers, like the 0.9.
The inability of the EUR to GBP rate to move reflects two macro themes seen lately – the USD declining trend and the Brexit uncertainty.
The USD hovers around its 2020 lows, with little or no signs that a reversal is in place. The moves are so coordinated in all USD major pairs, that there is little or no volatility spillover in crosses. For instance, a move higher in the EURUSD followed by a similar mover higher, percentage-wise, in the GBPUSD, lead to no movement on the EUR to GBP cross.
The cross needs an exogenous shock to trigger a change in flows – and that might come from the Brexit developments.
Last week we have seen renewed interest for the GBP. News hit the wires that a Brexit deal may come as soon as September. However, in a typical summer trading fashion, the breakout seen on many GBP pairs reversed quickly.
Developments on the pandemic front may also affect the EUR to GBP moving forward. The recent required quarantine for all U.K. nationals returning from Spain and France created troubles for people stranded abroad. France retaliated with a similar measure, and rising tensions may trigger more volatility on the EUR to GBP exchange rate.
The EUR to GBP exchange rate finds bids at every attempt to move below the 0.90 level. But any bounce higher was sold so far. Moreover, the EURGBP cross puts pressure to the downside, as suggested by the price’s inability to break the series of lower highs.
To trade it, wait for the market to break below 0.8950. Next, place a stop loss at 0.9050. Finally, set the take profit two hundred pips lower, for a 1:2 rr ratio.
