Consequences of Brexit and EURGBP

After the recent events connected with Brexit and the risks of the Eurozone, the prospects of EURGBP were quite cloudy. The same as the situation on Albion. The main question remains the following: whether there is a good foundation for trend or not. Today we will check this in our article.

Basic arguments

The prospects of the Euro depends on the stable worlds economy growth, the same as for the majority of postindustrial countries. However, recently such prospects are faded out because of China, which demonstrates the first signs of the economy falling. Lately, China found some resources to mobilize its economy, and the demand for the Euro got significantly higher. On the other hand, we can see the decreasing of the GBP because the decision of postponing Brexit for a couple of more months keeps the UK in a suspended state and this uncertainty weighting the GBP down.

So, we can see that the growing trend of EURGBP has some fundamental grounds. Also, the situation is confirmed with the forward rate, which will remain positive within the next two weeks.

Technical arguments

Picture 1. The price chart of EURGBP for 21.04.2019 - 21.05.2019.

On picture 1 we can see that the whole Euro index has a perspective of growth, which is supported by fundamental values, especially in the last time. Since the beginning of the year, it looks like a break on a chart after a downward trend.

Picture 2. A price chart of EURGBP for 01.01.2019 - 21.05.2019.

On picture 2 we can see that the change of trend became clear on 03.05.2019 when a trend line transformed into a support line, which for EURGBP indicates a break of this trend.

Technically we expect rising because the trend has just begun to emerge after a long downwards movement.

Analysis of big traders' positions

Picture 3. A price chart and the index of big traders' positions of EURGBP for 21.04.2019 - 21.05.2019.

As we can see, the index of big traders indicates a growth in picture 3, which is more connected with the weakness of GBP, than the strengthening of EUR. The Euro is still influenced by the statement about softening of the monetary policy, which adds some extra price to the currency.

Forecast:

According to the arguments mentioned above, we can assume that during the next 2 weeks we will see the growth of EURGBP.

Also, the main reason for this is the weakness of GBP, so you are encouraged to have positions "down" for GBP.

To have a more successful experience with trading, we also recommend you to use the following indicators that will help you to find better entry points:

- RSI (Relative Strength Index)

- MA (Moving Average)

Finally, for a more confident experience, we recommend keeping the ratio of opened trades: 2 up : 1 down.