Trading Anything UK-Related a Difficult Proposition Right Now - Dukascopy Bank
Paul Rosenberg, Market Analyst at www.economiccalendar.com, on EUR/GBP
The British Pound has fallen below the 1.30 level against the Euro this week, as the recent Guardian's poll showed that 45% of Britons would vote to leave, while only 42% would vote to remain inside the EU. Still, the majority of opinion polls suggest that the UK will not leave the common bloc. Why the following survey has had such a big impact on Sterling movement this week?
To put it simply, markets do not like uncertainty, even when news sources are of varying levels of credibility. Swings in both directions are to be expected as both sides of the market (longs/shorts) continue to speculate and square up positions ahead of the vote. As we move closer to the vote, if a trend in news-flow begins to establish itself leaning more towards either 'Brexit' or 'Bremain', then we may start to see a more consistent reaction by the market.
What should a trader focus on next week in order to successfully trade EUR/GBP pair?
Trading in anything UK-related is a difficult proposition right now, whether it be Sterling and its related cross pairs or other mar-kets such as the FTSE 100. With that said, given the uncertainty surrounding the outcome of the vote, markets are unlikely to move too far in either direction without reversing direction, unless a trend in news-flow develops.
What is your forecast for this pair by the end of the next week?
From a technical standpoint, the EUR/GBP remains within a bearish channel off the April high. There is resistance at this time just above in the area between 0.7750 and 0.78. At this time, until a strong break above the 0.7800 level can take hold the ben-efit of the doubt is given to the trend lower. This could lead to a move back towards this week's low at 0.7572. However, if the EUR/GBP can move above 0.7800 with conviction, then it could rally up to the next area of resistance around the 0.7925 level. Any trades established at this time until we move pass this vote should only be short-term.