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By: Ady Phangestu
Yesterday’s break reflects an area of tight price consolidation on EURGBP recently. The price broke higher from the descending tunnel upper line, forming a contracting triangle, and re-entered the price range after failing to continue its move to break the 0.9156 price barrier. The price is still moving in last week’s range between 0.9076-0.9156. Buyers seem to want to repeat the rally gradually, or rather take corrective price swings. The price is seen sitting above the moving average EMA 50 and EMA 120, with a weak upward bias seen from AO. The price of the last retracement touched 61.8% and is currently around 0.9100. Today, we moved below this key level to S1 at 0.9078 before recovering.
The EURGBP exchange rate is highly dependent on the UK and Eurozone monetary policies. The risk of a no-deal Brexit allows the pair to rally, while in the case of a deal it is likely to be bearish. But of course, this is only one factor of Brexit, and there are always other factors out there. Meanwhile, the ECB has continuously emphasized easing, of late.
Bailey’s Bank of England (BOE) speech was part of the online panel discussion at the annual Single Resolution Council conference. In his two previous statements, Bailey spoke “around” negative rates. However, the possibility of the introduction of negative interest rates in the near future has not yet come to pass and once again he was very coy on its use. He did, however, say that the BOE will use firepower as needed in the event of a 2nd or even 3rd virus wave, “actively and aggressively”. The negative interest rate policy, however, still exists, should the Brexit agreement fail, which will burden the UK economy. It is possible the Bank may be preparing the market for such a possibility.
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