EUR/GBP Touches 2.5-Year Low, But More Downside Potential Remains

EUR/GBP's longer-term bias clearly remains to the downside...

As we noted on twitter earlier today, the British pound is once again the strongest major currency on the day…but more to the point, it’s also making a run at the Canadian dollar for the strongest major currency on the year.

While it’s true that traders generally fear uncertainty (and with the looming specter of Brexit and now an election in less than two weeks’ time, there is no major currency that’s experienced more uncertainty this year than the pound), it’s also true that ambiguity creates opportunity for traders. As the perceived probability of no-deal “hard” Brexit has faded, the pound has come storming back against its rivals, hitting a 7-month high against the greenback and a 2.5-year high against the euro.

Keying in on EUR/GBP, the pair briefly peeked below 0.8480 to its lowest level since May 2017 this morning. From a technical perspective, rates remain in a clear downtrend off their August highs, with the unit down an astounding 800 pips over that period:

Source: TradingView, City Index

As the chart below shows, EUR/GBP is testing strong previous support just below 0.8500, and with the RSI indicator in a persistent state of bullish divergence, there’s a case for a small recovery in the latter half of this week.

Taking a step back, the longer-term bias clearly remains to the downside; accordingly, readers may want to consider short opportunities on bounces toward the top of the recent bearish channel near 0.8530 or on a confirmed close below 0.8480 support, especially if opinion polls continue to show the Conservatives with a comfortable majority. Below that key area, there’s little in the way of relevant support until the May 2017 lows just under 0.8400 and the April 2017 trough around 0.8300 after that. Only a break above the weekly high at 0.8570 would shift the near-term bias back in favor of the bulls.


From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.