EUR/GBP

EUR/GBP is highly sensitive to Italy and Brexit politics and closed down by  -0.6% on Friday, moving lower to 0.8790 within a range of 0.8847-0.8777. The bears had the bulls bowing out on the UK-EZ rate divergence, but that could all change on forever conflicting Brexit and Italian headlines. Jean-Claude Juncker, the head of the European Commission, was reported saying that the chance of the UK and the EU reaching a deal has increased in the last few days and could even be agreed by November. However, European Council President, Donald Tusk, said an agreement would not be possible until the end of 2018. The Irish border is still a sticking point and the Irish PM Leo Varadkar said there is still "a fair bit of work to be done" - The UK is due to leave the EU on 29 March 2019.

With respect to Italy, The EU said on Friday that Italy must comply with rules and has rejected their fiscal outline. As reported by Bloomberg, "European Commission President Jean-Claude Juncker called on Italy to redouble its fiscal efforts to avoid deviating from the goals agreed to with Brussels."  - “Italy’s revised budgetary targets appear prima facie to point to a significant deviation from the fiscal path” EU Commissioners Valdis Dombrovskis and Pierre Moscovici wrote in a letter to Italian Finance Minister Giovanni Tria - “This is therefore a source of serious concern,” the commission’s finance chiefs said in their letter responding to a note sent by Tria the day before.

The pair has continued with its southerly trajectory and, significantly, the cross is now below the descending channel's support and testing daily S3 at 0.8783, almost a full cent below the prior  5-month uptrend located at 0.8862. RSI is still biased lower and the pair can move the 76.4% Fibo of he April-late aug rally at 0.8734 targetting 0.8620 on the wide on a break of the 0.87 psychological level.