Euro/Sterling - caught between two stools


The most interesting development of the day can be seen in the H4 Euro/Sterling (EURGBP) chart, where short-term support at 0.8762 has just been breached, and will now serve as a resistance level to any rally. As this is a fairly short-term projection there is far more scope for this to be reversed, particularly if it can close a candle above 0.8800. This particular pair is the one with most at risk in the Brexit endgame, as no-one at this stage can say with any certainty what the outcome will be. The markets dislike, and usually punish, uncertainty, but in this case it’s almost impossible to choose which side to slap first, or hardest. The UK are being backed into a “No Deal” Brexit by EU intransigence, and in such a scenario the bigger loser would be the EU, not the UK. This tends to suggest that last-minute compromises will be on the cards as a “No Deal” Brexit immediately takes the astonishing unconditional £39bn severance payment offered by the UK out of the equation – and the EU might well be fools, but they are greedy fools and will not let such a bonus slip away lightly. Such an outcome would add further pressure to Germany, who are already looking at data that suggests that they are on the brink of recession, and however bad it might be there, it will be worse in the other member states.  None of this makes pretty reading for Euro Bulls, but there is little to comfort Sterling bulls either at this point. The removal of uncertainty would allow an objective review of Sterling’s prospects and it might well be a case of “Sell the Rumour, Buy the Fact”, and see some faith restored to the Pound.

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