Danske Research discusses EUR/GBP outlook and advises long-term investors to consider engaging in short exposure above 0.8950.
"GBP continues to trade on a weak note, and this morning, EUR/GBP has broken above the (now previous) year-to-day high at 0.8968.
While the increase in EUR/GBP yesterday can be attributed mainly to the increase in EUR/USD, our short-term financial model indicates that the risk premium on GBP might have increased further, with the cross now trading 0.8 standard deviation above the model’s short-term estimate of 0.8823.
For the longer-term investors, we still think a sell above 0.895 is attractive from a risk/reward perspective. However, given the past days’ weak performance in GBP, with GBP risk premium most likely on the rise, we maintain a more cautious tactical stance in the short term and stay sidelined for now.
Near term, the important technical levels to watch out for are 0.8982 in EUR/GBP," Dnakse advises.