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WTO Decision and Positive Brexit Vibes Send EURGBP Lower

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By Eno Eteng (MSTA), Market Strategist at InvestingCube and ATFX.

The EURGBP pair traded lower on Thursday as news emerged of the award in the WTO case between the EU and the US over Airbus subsidies in favour of the US. This paves the way for the US Trade Representative’s (USTR) office to apply 25% higher tariffs on certain EU exports to the US, totaling $7.5 billion. Goods affected include pork products (except ham), cheese, sweaters, pullover, wool clothing, and alcoholic drinks.

In the UK, the PM has presented a new Brexit proposal with changes that have been described as being a “massive improvement”. The changes include the removal of the Irish backstop trap and provision of a safeguard of consent to Northern Island. Key EU officials have also welcomed these proposals as an improvement, though a few (not the majority) expressed misgivings that the proposal does not meet all the criteria that are required to deliver a soft Brexit.

The market largely welcomed the news of the new proposal and gave the British Pound a boost.

 

EURGBP Technical Playbook

The EURGBP was on offer as a result of the divergent fundamentals that were at play yesterday. The Euro found the going tough as it prepares to absorb further tariff-related shocks from the USTR’s office. On the other hand, the new proposal from the UK PM’s office seems to have been the shot in the arm that the British Pound has been awaiting all week.

 

EURGBP Daily Chart

EURGBP currently finds itself within the confines of a rising channel. The pair dropped below the channel’s trendline, but could not sustain the bearish momentum and the daily candle ended up closing inside the channel.

A break of the channel’s lower trendline could see traders challenge the 0.8839 level. If price breaks below the 0.8839 level, the 0.87221 comes into focus.

On the flip side, the price may continue to trade within the channel for some time, and if price breaks to the upside, then the Jan 14 at 0.89415, and the Nov 19 2018 highs at 0.89645 will come into focus, in that order.

A break above 0.9092 opens the door to the August 2017 and August 2019 highs, beyond which the multi-year, long-term uptrend resumes.

Eno is a certified financial technician and member of the UK Society of Technical Analysts. He loves to trade and write about stocks, Forex, and CFDs. Since 2009, he has consulted several financial companies as a trader and strategy developer. His work can be seen on Investingcube.com.

 

 

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