Technical outlook: Euro and pound exchange rates before the ECB

Summary:

• Boris Johnson becomes new Prime Minister in the UK

• ECB rate decision tomorrow

• Reversal of the EURGBP

• EURUSD and GBPUSD close to this year's lows

The European Central Bank's rate decision will be released tomorrow. In terms of interest rates no changes are expected, but information on the QE programme will be important. When analysing the situation in relation to the pound against the euro, it is worth taking into account recent events in the United Kingdom. Boris Johnson, who is known for his firm approach to Brexit, was elected Prime Minister. He has said many times that the UK could leave the EU even without an agreement, in his opinion a quick solution of the "matter" is necessary. If his approach does not change, the UK could leave the EU quite quickly. Let's see what the technical situation looks on EURUSD, GBPUSD and EURGBP.

EURUSD close to YTD lows

Looking at the EURUSD chart, the price is close to YTD lows. After breaking the 1.1200 round level, one could see a smooth downward movement of nearly 70 pips. After reaching on the new lows in the morning, the course tries to rebound. An upward correction is of course possible, but the downward scenario looks more probable. It is possible that this week the EURUSD will test the lowest levels in 2019, around 1.1110. A change of trend can be considered only when the price returns above 1.1200. Higher volatility will certainly appear on Thursday, when the ECB decides on the level of interest rates.EURUSD continues to fall after defeating its round 1.1200 support. Source: xStation5

Pound to dollar exchange rate under pressure 

The second instrument discussed today is GBPUSD, which has been under pressure for a long time. On Wednesday, however, the British pound is gaining 0.46% against the US dollar. Nevertheless, the main trend is still downward. The first signal for a greater upward correction will be the breaking of resistance at the level of 1.2570. In such a scenario, one could speak of a reverse head and shoulders formation. The neck line for this structure is marked with a purple line. It is also worth considering the range of the overbalance system. Another resistance results from the 1:1 structure, the resistance is at 1.2645. Only if the resistance is overcome, it would lead to a change in the chart. So far, every upward movement is only a correction in a downward trend.

GBPUSD is trying to rebound, it stays close to YTD lows though. Source: xStation5

The EURGBP is changing the trend

The exchange rate of the euro against the pound has generated a signal to change the trend. The first information about the change of direction is the breakout of the 100-period moving average, which for a long time has kept trend. However, the confirmation of the downward direction is breaking the lower limit of the overbalance system. As long as the price is below 0.8947, the downward trend is valid. This is due to the fact that the EURUSD is falling deeper and the GBPUSD is rebounding temporarily (as it seems). If the current situation remains unchanged, there is a chance that the downward correction on the EURGBP will intensify. There are reasons to expect some change in the EURGBP market. Source: xStation5.