The endless talks between EU-UK were extended last Thursday and expected to extend again for another few days. UK President Boris Johnson said that the talks were all over unless Brussels really did change its negotiating aims from punishment to free trade.
FX: The euro cross has been caught in a range of 0.9000-0.9150 since mid-October.
Turning to the economic data, the UK’s latest Flash PMI survey data reported below market expectations. The data suggested that there are plenty of challenges ahead, and it will still be an uphill battle to settle above pre-pandemic levels. Besides, the CPI for the 12-month rate was recovered from August.
Manufacturing production (index at 56.4) increased at a much faster pace than service sector activity (index at 52.3). In both sectors, the speed of recovery was the slowest for four months during October, as per IHS Markit.
Chris Williamson, Chief Business Economist at IHS Markit, said, “The pace of UK economic growth slowed in October to the weakest since the recovery from the national COVID-19 lockdown began”.
Data preview: Lack of economic data releases will keep investors sidelines. The latest UK COVID-19 cases and Brexit headlines could drive the GBP in the short-term.
The current downtrend paused at the key Fibonacci ratio of 61.8 percent. Generally, prices retrace towards the important ratio of 61.8% as a part of correction; from here, chances of talking support and showing reversal is highly possible.
In the case of EURGBP, the price touched a 61.8% ratio in mid-October, took support, and managed to trade higher. But the price action failed to hold the gains. There are chances that a bounce will be printed as long as EURGBP trades above the 0.9000 mark. Moreover, the price action is managing to trade above 100MA, indicating bulls keep the upper hand.
Medium-term: At weekly chart, Golden crossover was spotted the other week. Buying between 61.8 and 80.00% fib reactions offer a better risk-reward ratio with a stop loss below 0.8860.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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