EUR/GBP extends drop amid Eurozone concerns
The EUR/GBP is down for another week after giving up its gains last week to close lower, created an inverted hammer/doji candle on the weekly time frame. Following that bearish-looking candle last week, we have seen some subsequent downside follow through so far this week, with rates on course to potentially drop to 0.8300 and potentially even test long-term support at 0.8200 in the not-too-distant future.
With data from the Eurozone consistently disappointing expectations, China’s economy far from its growth goal to support Eurozone exports, you do have to wonder where growth for the Eurozone might come from. That’s why traders are not rushing to buy the euro despite today’s big surge in Chinese equities as a result of the latest round of stimulus measures. While a weaker US dollar is masking the EUR/USD weakness, looking at the EUR/GBP and several other euro crosses is telling.
The 'Chunnel', which is a reference to the Channel Tunnel that connects the UK and Europe, is approaching its post-Brexit lows nearing a band of prior support around 0.8200 - 0.8300. If you think of the troubles facing the UK economy right now, you’d think the EUR/GBP should be 2-3 hundred pips higher than it is right now. This therefore highlights what investors think of the Eurozone economy right now.
Anyway resistance for this pair now comes in around 0.8380 area.
By Fawad Razaqzada, market analyst with FOREX.com
With data from the Eurozone consistently disappointing expectations, China’s economy far from its growth goal to support Eurozone exports, you do have to wonder where growth for the Eurozone might come from. That’s why traders are not rushing to buy the euro despite today’s big surge in Chinese equities as a result of the latest round of stimulus measures. While a weaker US dollar is masking the EUR/USD weakness, looking at the EUR/GBP and several other euro crosses is telling.
The 'Chunnel', which is a reference to the Channel Tunnel that connects the UK and Europe, is approaching its post-Brexit lows nearing a band of prior support around 0.8200 - 0.8300. If you think of the troubles facing the UK economy right now, you’d think the EUR/GBP should be 2-3 hundred pips higher than it is right now. This therefore highlights what investors think of the Eurozone economy right now.
Anyway resistance for this pair now comes in around 0.8380 area.
By Fawad Razaqzada, market analyst with FOREX.com
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