Back in 2019, populism took hold of the United Kingdom (UK) with the rise of Prime Minister Boris Johnson. In his first year, Johnson has executed on Brexit as promised and consolidated power around him. However, his inflexible, aggressive tactics has not earned him the same respect from the European Union (EU) officials.
And that was before the coronavirus pandemic, which has not made things easier for the UK nor the EU. Italy and Spain were hit hard by the disease, Johnson fell sick in March, and economies across Europe shut down in response to the pandemic. As a result, the British economy took a beating. On Friday, UK GDP reported a -17.4% for the past 3 months. The EU saw a contraction of -3.2% for the first quarter of this year. Q2 data is going to come in much worse.
The $EURGBP is playing this back-and-forth dynamic out in real time. Price action is rangebound, stuck between 0.9050 and 0.8850. Only a break and successful hold out of the range, changes that and restarts a trend direction. Play the range until it breaks. What will finally break the range? The nice thing as traders is that we don’t need to know why. Watch the levels and let price do its work.
If you are interested in learning how I found these levels, please check out the CHARTS101 course. Read the charts for yourself so you can trade what you see and not what I think.
Read more:
- Le crunch: are the Brexit talks doomed before they begin? (The Spectator)
- Eurostat news release
- National Institute Monthly GDP Tracker