Brexit Developments Impact The Euro

• 24 Aug 2017

EUR/GBP

The EUR/GBP pair was supported by fundamentals in yesterday’s trading session. The U.K. revealed a plan to keep E.U. laws in place after the leaving the union, replacing the direct legislation the Eurozone has over the member state currently. To the markets, it was seen as a concession and a ‘win’ for Europe. Hence, Euro buyers dominated price action yesterday. However, market noise aside, the EUR/GBP has reached a statistical extreme. RSI is currently approaching the 80 overbought area indicating a bearish reversal is overdue. Price action is also testing upper Bollinger band, therefore a break of this upper-bound would indicate the bullish trend may not last.

Impact event: U.K. Q2 GDP data will be released at 11:30 GMT+3 and will impact all Sterling pairs.

GBP/USD

The GBP/USD pair has reached a previous resistance level at 1.277 as bearish momentum hit the pound in yesterday’s trading session. The question is whether bearish sentiment will continue to reach the lows of post election uncertainty in June. MACD has broken the zero line and RSI has flattened at the 30 ‘oversold’ level. A break of the 1.277 price level to the downside would send prices towards the next target at the 1.262 support line.

USD/CAD

The USD/CAD pair is testing the 1.255 price level representing a previous resistance line. Price action recently broke the 20-period EMA and momentum indicators confirm the bearish sentiment. Price action is likely to bounce around within the price range of 1.255 and 1.276 as weakness in the U.S. dollar persists.

GOLD

Gold prices are reaching close to a market top as the metal benefits from weakness in the U.S. dollar. Price action has stalled just below the 1294 price level which represents a previous market top. If prices can push towards this price line, a bearish reversal could be indicated. There appears to be some selling pressure in the current trading session, with interest rising; denoted by the rise in trading volume. MACD remains in bullish territory, however, RSI has flattened just below the 70 line. Fundamental news will be required to determine the direction of the pair in the near-medium term.