Johnson stays the course with Plan B; EUR/GBP looks sick

Despite over 200,000 new confirmed coronavirus cases reported in the UK yesterday, PM Boris Johnson said that there is a good chance there won’t be a need to increase restrictions or force lockdowns. Johnson said that the measures created under Plan B should be enough to carry the UK through the Omicron variant wave of the coronavirus, which includes working from home, wearing masks and using vaccine cards. However, Johnson did warn that it may take a while to get past this phase and that the UK is not out of the woods yet. He also noted that the booster program is helping to keep things from getting worse. With less restrictions and no lockdowns, the Great British Pound is on fire, primarily vs the Euro!

EUR/GBP has been moving lower in a channel (blue) since mid-April 2021 from a high of 0.8917 to today’s current low of 0.8336. In late September, the pair broke higher out of the top of the channel to the 200 Day Moving Average near 0.8658 but was rejected. Price moved back inside the channel and moved to test the bottom trendline near 0.8403. This was the beginning of a wider channel (green) which EUR/GBP has been trading in since. Today, the pair tested the bottom trendline near 0.8350.

Source: Tradingview, Stone X

On a 240-mintue timeframe, within the larger (green) channel, price completed a Head and Shoulders formation (with 2 right shoulders) and reached its target near previous lows at 0.8400. Price continued lower, and today, broke below the bottom trendline of the channel near 0.8350. Support below is at the 127.2% Fibonacci extension from the lows of November 21^st, 2021 to the highs of December 8^th, 2021 near 0.8321, then the February 18^th, 2020 lows near 0.8282. Below there, price can fall to the 161.8% Fibonacci extension from the recently mentioned timeframe near 0.8245. However, notice that the RSI is diverging with price, an indication that the pair may be ready for a bounce. Resistance above is at the previous lows near 0.8380. Above there is horizontal resistance at 0.8415 and 0.8454.

Source: Tradingview, Stone X

If it is true, as Boris Johnson predicts, that the Omicron variant can be contained and there won’t be further restrictions or lockdowns, it should make for a bullish Pound. Therefore, EUR/GBP may continue lower. However, with EU CPI on Friday and an RSI diverging with price, watch for the pair to possibly bounce in the near-term.

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.