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Put EURGBP on your radar

Luke Suddards
Research Strategist
3 Mar 2022
EURGBP is once again at a very interesting level - 0.83. We've been here before though and have failed to see follow through. Read below to find out more.

Could this finally be it, EURGBP decisively breaks below 0.83 and pushes lower as short sellers jump on the price decline? We've been here multiple times before and actually this level has not been properly broken since Brexit (almost 6 years now). Why do I lean more bearish? EURGBP risk reversals are signaling bearish sentiment with significant skew towards downside protection via puts over calls. I believe the BoE will out hawk the ECB, which should lead to short term yield differentials widening. Lastly, the UK economy is less exposed than the eurozone to the fallout in Ukraine. There is something on the charts though that bears should filter into their thesis and that is the negative divergence between the RSI and price. 

(Source: Tradingview - Past performance is not indicative of future performance.)

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