EUR/GBP appears oversold, expected to grind lower – Danske Bank

Senior Analyst at Danske Bank Morten Helt noted the oversold condition of the European cross, although he believes it could drop further in the next months.

Key Quotes

“EUR/GBP continued lower yesterday and has dipped below 0.87 this morning. The move lower in EUR/GBP yesterday was driven by a strong UK jobs report, a sell-off in USD and brewing Brexit optimism”.

“EUR/GBP looks increasingly oversold according to short-term measures suggesting a high correction risk. However, momentum is strong and a dovish stance from the ECB today could weigh further on EUR/GBP”.

“Key support levels in EUR/GBP are seen around 0.8690 and 0.8652 and a break below 0.8652 would send the cross into unchartered technical territory. We expect EUR/GBP to break lower in 6-12M on Brexit clarification, and we recommend clients with GBP income/assets to hedge GBP exposure via options”.