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23.10.2020 11:15 AM
Analysis and trading ideas for EUR/GBP on October 23, 2020

Today, on the last day of weekly trading, we will consider an interesting and much-loved euro/pound cross rate. I think it's no secret that the difficult negotiations on the conclusion of a trade agreement between the European Union and the UK have a special impact on the price dynamics of EUR/GBP. Naturally, the spread of the second wave of COVID-19 in many European countries and the UK also affects the course of trading for the submitted instrument, since the imposed strict restrictions harm economic development.

There is no doubt that the technical picture plays a significant role in the price dynamics of the euro/pound, and we will immediately proceed to consider it.

Weekly

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Although today is Friday, we will start the analysis with a weekly timeframe. Here you can see that after a very strong growth to 0.9290, the strength of the bulls on the cross has dried up and their opponents (bears) intercepted the reins of the further direction of trading. As a result, the quote fell to the area of the most important psychological and technical level of 0.9000, where it quite expectedly found support and tried to recover. However, above the price zone of 0.9147-0.9160, the players failed to raise the rate. In principle, the futility of the upward scenario became clear even after the results of the week before the last trading, when a candle with a very long upper shadow and a very small bullish body appeared on the chart. It was followed by a doji candle with virtually equidistant shadows, which also did not add optimism for the continuation of the upward scenario.

And at the auction of the current five-day period, the attempts of the euro/pound bulls to resume growth were not successful. After reaching the level of 0.9147, the cross turned south and is now trading near 0.9038. The closing price relative to the mark of 0.9000 will be very important. If the bears manage to complete the weekly trading under this important level, the prospects for further decline will increase significantly, however, as we can see, the blue line of the Kijun Ichimoku indicator passes at 0.8979, which can provide strong support and return the cross above 0.9000. It is also characteristic that another line of this indicator (the Tenkan) does not let the pair go up. It turns out that the euro/pound can determine its further direction after a true breakdown of one of these lines. The wider range in which the EUR/GBP cross rate is traded can be designated as 0.9300-0.9000.

Daily

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On the daily chart, we can see what a strong drop occurred on October 21. There is no doubt that this dynamic was influenced by information about the Brexit negotiations. As a result of the fall, both Kijun and Tenkan cloud boundaries were broken, as well as the 50 simple and 89 exponential moving averages. Yesterday and today, the cross is corrected to the previous strong fall and tries to return above the black 89 exponentials. Yesterday, this could not be done and trading closed lower. Further, today, at the end of this article, the pair is trading above the 89 EMA. If the correction continues, we can expect a rise to 50 MA, which passes at 0.9062. A deeper correction will send the euro/pound to 0.9076, where the Tenkan line and the lower border of the daily Ichimoku cloud converged.

Trading recommendations for EUR/GBP:

Despite the continuing uncertainty about the conclusion of a trade agreement between the EU and the UK, the technical picture for this cross-rate indicates a stronger position of the bears. The situation will change in favor of their opponents only after a true breakdown of the resistance in the area of 0.9160-0.9175 and consolidation above the last level. Based on this, I consider the main trading recommendation for EUR/GBP to be sales, the nearest of which is better to open after corrective pullbacks to the price zone of 0.9060-0.9080 and the appearance of bearish reversal patterns of candle analysis there. Most likely, if such an opportunity appears, it will not be today, so you need to be patient and wait for a little. I consider purchases riskier at the moment.

Ivan Aleksandrov,
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