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Jan 13 - 09:55 PM

EUR/GBP - COMMENT-As The USD Leads EUR And GBP, There's Value In EUR/GBP

By Andrew M Spencer  —  Jan 13 - 08:53 PM

EUR/GBP touched a 0.8884 low on Wednesday, towards the base of the 0.8860-0.9290 range that has held since June 2020.
Another dip below 0.8900 would provide an opportunity for EUR/GBP longs with solid risk-reward parameters.

The Brexit transition is having a few teething problems in its early days - understandable with such a profound change - as increased paperwork disrupts road haulage nL1N2JO2CE, while the service sector awaits an agreementnS8N2IW08O.

Positioning should not be a major factor for EUR/GBP, as Morgan Stanley's FX Positioning Tracker showed both the EUR and GBP overbought against the USD as of Jan 11, suggesting little trading bias in the cross.

Control of COVID-19 is key for economic growth in 2021 in both the UK and European Union, and thus for the direction of EUR/GBP.
While both jurisdictions are struggling with the spreading virus and have vaccination rollouts underway nL8N2JO36E, Britain has been hardest hit so far nL8N2JO53P.

With 0.8860/65 providing a base on five occasions since June, there is fundamentally little reason to suggest a sharp EUR/GBP fall is imminent.
Buying a dip below 0.8900 with a stop below 0.8840 would provide good risk-reward for a move back to the 0.9100 midpoint of the recent range.

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eurgbp jan 14 Click here

Source:
Refinitiv IFR Research/Market Commentary

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