EUR/GBP maintains strength as sterling softness endures

Although the euro and pound both suffered massive hits as a result of last week’s Brexit decision, the euro has fared substantially better than sterling in the aftermath of Thursday’s EU referendum. While both currencies were expected to plunge on a Brexit outcome, it was also projected that the British pound would endure a significantly more severe blow. This was indeed to be the case, as the EUR/GBP chart displays an exceptionally sharp surge from the pre-Brexit 0.7600 low, representing a swift and sudden appreciation of the euro against the pound after the UK voted to leave the EU.

Post-Brexit, EUR/GBP continued its rise to hit a new two-year high of 0.8377 on Monday, just short of key resistance around 0.8400, before making a modest pullback on Tuesday as both the euro and pound tentatively stabilized. In the process of that quick climb, the currency pair broke out above a major previous resistance level around 0.8100, which represented the last major high back in April.

Since the 0.7000-area lows in November, EUR/GBP has exhibited a strong bullish trend outlined by a key uptrend line and the 200-day moving average. In the past couple of months, that uptrend has been interrupted by pullbacks during periods of waning concern over the possibility of a Brexit. When the actual Brexit outcome surprised the markets last week, those diminished concerns instantly transformed into shock and uncertainty over the future of the UK and EU, placing tremendous pressure on the pound and immediately extending the uptrend for EUR/GBP.

Although the euro has indeed sustained significant damage from Brexit consequences and could continue to do so, it is likely to persist in maintaining an edge over the severely battered British pound, at least for the time being. As long as EUR/GBP remains above the noted 0.8100 level, now as support, the bullish bias remains intact. In this event, any bullish breakout above the key 0.8400 resistance level could see the currency pair rise to higher resistance targets at 0.8650 and 0.8800.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The markets are moving. Stop missing out.