EUR/GBP – 50% of 6-1/2 year long downtrend retraced

The EUR/GBP cross jumped to 0.8368 on Friday, which is the 50% Fibo retracement of the move from Dec 2008 high to July 2015 low, but failed to take out the same and backed off this week to trade around 0.83 handle.

Focus on politics

The pair is at the mercy of the political developments in the UK and across Europe. The single biggest threat faced by the common currency is a possibility of major Eurozone nations coming up with their own versions of EU referendum in the near future.

Meanwhile, post referendum politics in the UK is a mess. Markets need clarity regarding the kind of relationship UK aims to maintain with the EU after completing the exit procedure.

In short, politics is likely to overshadow economics when it comes to EUR/GBP pair. The European data docket is light today; hence political news flow remains a major determinant of the EUR/GBP exchange rate.

EUR/GBP Technical Levels

The immediate hurdle is seen at 0.8368 (50% of Dec 08 high-July 15 low), which if breached would open doors for 0.84 levels. A violation there would expose 0.8506 (Feb 2012 high). On the other hand, a breakdown of support at 0.83 (zero figure) could yield 0.8257 (previous day’s low), under which previous cyclical high of 0.8117 (Apr 7 high) stands exposed.