The EUR to GBP pair is trading marginally lower as the Euro loses steam against the Pound for the third trading session in a row. The trigger for this downside move was the downbeat PMI data from the Eurozone released on Friday. The data showed that business conditions in Germany and France’s manufacturing and services sectors worsened, with all indices measured dropping below the 50.0 mark in various degrees after having held above that level in the previous month.
Despite the European Central Bank (ECB) raising rates by more than expected, comments by ECB Chair Christine Lagarde on slowing economic activity and higher economic uncertainty as a result of Russia’s war with Ukraine sent the Euro tumbling after an initial spike. The economic data print for the Pound is non-descript, which leaves the pair fully subject to the impact of last week’s fundamentals and current technical plays.
Trading volume on the Euro to GBP pair remains light as the markets await the FOMC interest rate decision tomorrow. This decision could impact the value of the Euro to the US Dollar, which briefly approached parity as it touched off 23-year lows. A weakening of the Euro across the board could be on the cards if the Fed delivers an aggressive rate hike.
EUR to GBP Forecast
The breakdown of the rising wedge pattern on the daily chart resulted in a downside move that was truncated at the 0.84006 psychological support level (15 February high, 13 May/15 July 2022 lows). The bounce from this level culminated in an upside move which met resistance at 0.85676 (), followed by a pullback that has violated the 0.84883 support level (25 May and 9 June lows). The active candle attempted a return move but has been rejected at this price mark, now acting as resistance in role reversal.
The 17 March high/18 July low at 0.84611 appears to be the next downside target. A breakdown of this level targets 0.84381 (23 May low) before the price action mounts a retest of the 0.84006 price pivot. Only when this pivot breaks down can the bears aim to make 0.83073 (8 April 2022 low) and 0.82507 (14 April 2022 low) potential harvest points.
On the flip side, the bulls on the Euro to GBP pair need to force upside action to break above the 21 July high at 0.85844, targeting 0.86074 () as the initial harvest point. A subsequent push toward the 0.87186 price mark (14 June high) will depend on whether the bulls can violate the cluster of late June highs that are capped at 0.86410. This upside move requires a break of sequential barriers at 0.85105 (15 July high), 0.85372 (20-22 July highs), and 0.85676 to gain traction.
EUR/GBP: Daily Chart
