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EUR/GBP: Pound head and shoulders above euro

Fawad Razaqzada Fawad Razaqzada 14/01/2021
EUR/GBP: Pound head and shoulders above euro EUR/GBP: Pound head and shoulders above euro
EUR/GBP: Pound head and shoulders above euro Fawad Razaqzada
We have been pushing out increasingly bullish forecasts for the pound over the past few weeks and months, and it is all to do with the fact that a no-deal Brexit has been avoided.
 
A no-deal Brexit was undoubtedly a big risk for the UK economy as it would have raised prices of imported goods among other things, pushing the Covid-hit economy further into recession. But this is no longer the case and it is a big relief for investors – and the pound.
 
What’s more, the UK is also among the first countries to roll out the Covid vaccines, which should mean it may be among the first European countries to end the lockdowns. At the moment though, it is becoming increasingly difficult for some investors to remain hopeful and see the light at the end of the tunnel, as we are seeing record new COVID cases and deaths by each passing day. But when the lockdowns eventually do end, hopefully in the not-too-distant future, we could see the economy rebound sharply, providing sterling an additional boost.
 
Investors are thus continuing to see through the short-term risks that the latest lockdowns pose to the economy. They know full well that the UK is not alone in this and this is impacting most other European countries as well. This is why the EUR/GBP is not rallying.
 
As sterling’s bullish momentum gathers pace, it is worth keeping an eye on the EUR/GBP, which is in the process of forming a major head and shoulders reversal pattern:
 
EUR/GBPSource: ThinkMarkets and TradingView.com

The EUR/GBP has already broken below the bullish trend line and the 200-day average at around 0.9000, and this has tipped the balance firmly in the bear’s favour. Consequently, I now expect the neckline at around 0.8865 to break down next, which should then pave the way for further momentum selling in the days and weeks ahead.
 
However, if rates were to go decisively back above the 0.90 handle, then that would be an indication that the potential reversal has failed to work, and that in turn could lead to a sharp squeeze higher.
 
For more information on head and shoulders and other reversal patterns, watch our YouTube videos HERE. For trading the failure of reversal patterns, we have created THESE videos to help you spot them.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Mohammed Zidan
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Mohamed Zidan
Chief Market Strategist, Dubai

Mohamed Zidan is a chief market strategist in Dubai and CFA Level III candidate. He reports to London office and has more than eight years of experience focusing on Forex, Commodities, Indices and global economic developments as well as central bank policies and intermarket analysis. worked as FX Analyst, and Strategist in several different organizations and for various departments. He holds a bachelor’s degree from Cairo University in Egypt. Mohamed Zidan is a regular guest on several major TV networks such as; CNBC Arabia, Fran24 Arabic, Alarabiya , Dubai TV, Sama Dubai, Skynews Arabia, Saudi National News, and Egypt National news.

Zidan presents insight to the markets movements, holds open discussions and relays possibilities related to the world’s financial market and economies.

Mohamed Zidan has been invited as a guest speaker for several international seminars. Zidan provides daily and weekly outlook for the markets. His experience ranges from currencies, commodities, stocks and options. he applies a top-down, global macro approach combined with price action to generate trade ideas and anticipate the next move.

Victor Golovtchenko
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Victor Golovtchenko
Global Macro Analyst, Sofia

Victor Golovtchenko has been analysing and trading foreign exchange markets since 2004, and is actively involved in the online media space since 2014. His tenure as a Senior Editor at a major brokerage industry news outlet was followed with a breakthrough into the financial news space with the brand new TradeStar website.

As an affectionate macro-focused analyst, he has an integrated framework to look at financial markets as a whole, identifying gaps between currencies, stocks, bonds, and other asset classes to get a core complete picture of the macroeconomic environment.

Fawad Razaqzada
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Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Mohammed Zidan
Mohamed Zidan
He has more than eight years of experience focusing on Forex, Commodities, Indices and global economic developments as well as central bank policies and intermarket analysis.
Victor Golovtchenko
Victor Golovtchenko
Victor Golovtchenko has been trading on the foreign exchange markets since 2004, and is actively involved in the online media space since 2014. His tenure as a Senior Editor follows his role with TradeStar.
Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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