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EUR/GBP Could Face Headwinds Despite Intraday Gain

The EUR/GBP pair has recovered all Wednesday’s losses and trades 0.51% higher. This comes amid soaring German food prices, and moderate inflation raised bets of additional tightening by the European Central Bank (ECB). 

German consumer price index data came in line with forecasts of 7.5%. But while this appeared to show a plateauing of consumer price increases, food inflation continues to soar, hitting an EU-wide peak of 14.8% annually. German Final CPI came in at 0.9%, in line with previous and consensus numbers. Thirty-year bond auction yields came in at 1.10% interest in a 1.6 bid-to-cover ratio, lower than last month’s 1.41% with 2.1 bid-to-cover ratio.

While the outlook puts the 50 bps ECB rate hike expectation on the table, the EUR/GBP pair is expected to face headwinds in the future from rising energy prices and a shortfall in supply from Russia’s pipelines. The war between Russia and Ukraine continues to rage,

From the standpoint of technical analysis, the latest bounce in the EUR/GBP comes amid the pair’s bounce following the completion of the rising wedge’s measured to move at 0.83429. The upper edge of the descending channel represents the key price point to determine if the ascent continues or the decline resumes.

EUR/GBP Forecast

The uptick of the day is testing the resistance at 0.84611. A break above this barrier gains access to the 0.84945 price resistance, where the prior highs of 30 March and 14 July failed to clear. Above this level, additional upside targets are located at 0.85495 (5 May and 6 July highs) and 0.85986 (6 July high).

On the flip side, failure to clear the current resistance at 0.84611 could lead to a pullback, targeting 0.84006 psychological support formed by the 17 May and 13 July lows. A breakdown of this psychological support brings the prior low of 2/3 August at 0.83429 into the picture. Below this level, 0.83073 is the downside barrier formed by the previous lows of 20 January, 24 February and 8 April. This barrier needs to give way to continue the bearish trend that targets 0.82507 (14 April low) and 0.82057 (7 March low). 

EUR/GBP: Daily Chart