EUR/GBP takes a spiral below 0.7750 level

The EUR/GBP pair took a sharp knock to 0.7745 after the British Pound witnessed a sudden bout of buying interest on increasing odds of staying in the EU.

At the time of writing the pair is down nearly 1% bearing a double whammy from slightly better-than-expected jobs data from the UK and the latest 'Brexit' poll results that revealed a clear lead for the camp supporting to remain in the EU. Recent polls have been showing mixed results but most pointed towards a vote to remain in the EU.

Meanwhile, the shared currency (Euro) failed to get any support from the final reading of the headline inflation in the Euro-zone that matched the flash estimates of -0.2% in April, pointing to resumption of deflationary pressure.

The pair broke through an ascending trend-line support near 0.7765-60 area and has now dropped below April daily closing low level of 0.7750 and hence, remains vulnerable to further downside in the near-term.

Technical outlook

Karen Jones, Head of FICC Technical Analysis at Commerzbank, suggested the likeliness that the cross could be developing a ‘Head and Shoulders’ pattern.

“EUR/GBP after sitting all week just below the .7930/45 highs seen in February and March the market has finally failed and we suspect is developing a potential head and shoulders pattern”.

“This will only be confirmed on a close below the neckline at .7773. Failure here should trigger losses to the .7740 April low and .7654, the March low”.