- Summary:
- The EURGBP pair is forming an ascending triangle pattern, which is nearing its tip. Here are the key scenarios to watch on the EUR to GBP pair
The EUR to GBP (EURGBP) pair is down by about 0.36% today as traders reacted to the rising coronavirus cases and the risks associated with Brexit. The pair is also reacting to the rising consumer confidence numbers from Germany.
German consumer confidence improves
The EURGBP pair declined even after data from GFK said that consumer climate was improving in Germany. GFK estimates that the climate will be at -9.6 in July this year. That will be 9 points above the current level in June. In the report, the research company said:
“The faint light at the end of the tunnel, which was already apparent last month, is apparently getting somewhat brighter.”
They attribute the optimism to the recent VAT reduction and the other stimulus package passed by the government. Also, consumers are optimistic about the overall decline in coronavirus new infections. Still, it warned that the situation remains being fragile and difficult. For example, the number of coronavirus cases in Germany has ticked up recently.
This number came a few days after the impressive manufacturing and services PMI numbers.
Coronavirus cases rise
The EUR to GBP pair is also reacting to the rising coronavirus cases in the United States, Germany, and the UK. The worst-affected country remains being the United States, where officials confirmed more than 38,000 cases yesterday. In Germany, the government announced that it was putting more than 500,000 people back to a lockdown. This is after cases in Gtersloh and Warendorf increased in the past few days.
Meanwhile, in the United Kingdom, the number of coronavirus cases has been relatively stable in the past few days. This is true as the government starts the next phase of easing the lockdowns.
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EURGBP technical outlook
The EUR to GBP (EURGBP) pair is trading at 0.9031, which is lower the important resistance level shown in black below. The price is also above the 50-day and 100-day exponential moving averages. It is also along the 61.8% Fibonacci retracement level. On the daily chart, the pair is forming an ascending triangle pattern, which is nearing its tip. Also, the Average True Range (ATR) indicator has been falling. This means that volatility on the pair is easing.
Therefore, with the EURGBP triangle nearing the tip, I expect the price to have a breakout in the near term. As such, I expect bulls to prevail and possibly test the 78.6% retracement at 0.9240.
On the other hand, a move below 0.8896 will invalidate this trend. This price is along the 50-day EMA and the 50$ retracement,