Fundamental Analysis of EUR/GBP for January 25, 2019

EUR/GBP is currently trading higher after bouncing off the 0.8630 support area with a daily close after a non-volatile bearish trend earlier. GBP managed to gain momentum over EUR despite the BREXIT tensions. Now the time is ripe for EUR to assert itself as the market is correcting ahead of the BREXIT decision.

Bank of England's Governor Mark Carney recently stated that UK businesses cannot fully prepare themselves for the chaos of no-deal Brexit. With the risk of the UK leaving the EU without any transition agreement, Brexit may be delayed. However, a certain decision can be taken by March 29. UK Finance Minister Phillip Hammond is currently on the way to convince business leaders at the World Economic Forum in Davos, Switzerland where he will try to attract businesses in the UK. The British government is ready to allocate GBP100 million for 1,000 new doctoral research places focused on artificial intelligence for use in public hospitals, voice recognition software, and pollution monitoring. Hammond is also looking forward for a BREXIT deal, rather than no-deal BREXIT which may undermine the businesses currently operating between the UK and the EU region.

On the other hand, EUR is also interested in a BREXIT deal, but its terms are still quite uncertain. The UK is well set to leave without a deal but it is expected to hurt Europe as well as some of the bigger manufacturing businesses like Ford. Yesterday the ECB maintained the key interest rate at a record low of 0.00% as expected which held back EUR from further gains. In Frankfurt, ECB President Draghi stated that the eurozone's economy is already suffering from its biggest slowdown in half a decade which is putting questions on the interest rate hike decision. According to ECB Policymaker Villeroy de Galhau, The European Central Bank is committed to keeping the interest rates low and unchanged as it winds down its monetary stimulus to the economy. The ECB believes keeping the rate low is beneficial for the eurozone's economy in the long run which will let businesses grow under stable economic conditions. Though the ECB ensured that interest rates will be put on hold, thus expressing dovish rhetoric on monetary policy.

Meanwhile, EUR is expected to regain certain momentum while GBP is struggling for gains amid downbeat economic reports and the BREXIT dilemma.

Now let us look at the technical view. The price recently bounced off the 0.8630-50 support area. The pair is likely to trade higher, heading for 0.8850 area in the coming days. The dynamic level is currently quite far from the current price area which is expected attract the price towards the mean before pushing further lower. As the price remains below 0.8850 area with a daily close, the bearish bias is expected to continue.

SUPPORT: 0.8500, 0.8630-50

RESISTANCE: 0.8850, 0.8950




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