EUR/GBP Takes a Spiral Below 0.7750 Level
The EUR/GBP
pair took a sharp knock to 0.7745 after the British Pound witnessed a
sudden bout of buying interest on increasing odds of staying in the EU.
At the time of writing the pair is down nearly 1% bearing a double
whammy from slightly better-than-expected jobs data from the UK and the
latest 'Brexit' poll results that revealed a clear lead for the camp
supporting to remain in the EU. Recent polls have been showing mixed
results but most pointed towards a vote to remain in the EU.
Meanwhile, the shared currency (Euro) failed to get any support from the
final reading of the headline inflation in the Euro-zone that matched
the flash estimates of -0.2% in April, pointing to resumption of
deflationary pressure.
The pair broke through an ascending trend-line support near 0.7765-60
area and has now dropped below April daily closing low level of 0.7750
and hence, remains vulnerable to further downside in the near-term.
Technical outlook
Karen Jones, Head of FICC Technical Analysis at Commerzbank, suggested
the likeliness that the cross could be developing a ‘Head and Shoulders’
pattern.
“EUR/GBP after sitting all week just below the .7930/45 highs seen in
February and March the market has finally failed and we suspect is
developing a potential head and shoulders pattern”.
“This will only be confirmed on a close below the neckline at .7773.
Failure here should trigger losses to the .7740 April low and .7654, the
March low”.
