EUR/GBP: pullback ahead of further fall?

The pound gained due to upbeat UK’s PMI and vaccine news. Let’s analyze the chart.

What happened?

Today is the day of PMI reports from EU countries, the UK, and the USA. The Eurozone PMI report came out mixed: the growth of the manufacturing industry slightly exceeded expectation, whereas services rose less than expected. There is no surprise as bars, restaurants, and businesses in the hospitality and tourism sectors have really tough times these days. Bloomberg has even claimed that the fresh virus resurgence pushed the euro area into another contraction. At the same time, UK’s PMI reports beat estimates.

UK Prime Minister Boris Johnson claimed that he is ready to make a political intervention to boost the Brexit development. His aim is to reach a deal by the next week. That news increased the demand for the pound as well as the optimistic vaccine report of the AstraZeneca/Oxford University. In comparison with vaccines of Moderna and Pfizer, this one has a lower efficacy rate but still offers many advantages. It’s cheaper, faster to produce, and easier to store.

Technical tips

The vaccine news and upbeat UK PMI reports drove the GBP higher, and therefore EUR/GBP lower. The pair is trading inside of the descending channel. Today it has reached the strong support of 0.8870, which it has failed to reach many times this year, that’s why the price pulled back. If it jumps above the high of October 10 at 0.8930, it may rise to the next resistance of 0.8957. Support levels are 0.8870 and 0.8850.

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Kseniya Medik