EURGBP correction continues for the fourth consecutive trading session as investors sentiment improves across the globe. EUR is under selling pressure against the British pound as in Eurozone the clash between the European Central Bank and the German Constitutional court continues with many analysts now expecting that EU infringement proceedings against Germany might trigger a significant crisis in the common currency.
Investors also follow the debate around the common coronavirus bond (500bn) proposal from France and German. Four member countries, Sweden Austria, the Netherlands and Denmark, are against the proposal and will come with another suggestion.
On the other side of the pairs equation, the UK deficit expected to hit 273 billion by the end of 2020, as the UK economy is shrinking at the fastest pace since WWII. In March the GDP contracted by 5.8%, while the first quarter GDP contracted by 2% the largest fall since the financial crisis in 2009.
Meanwhile, the markets point to negative interest rates in the UK, despite the Bank Of England Governor, Andrew Bailey has rejected the negative interest rates scenario and said that the central bank could help the UK overcome the extra debt piled during the COVID-19 crisis.
EURGBP is 0.22% lower at 0.8920, as today the correction from two-month highs accelerates. The technical picture for EURGBP remains bullish despite the recent correction. A move below the 50-day SMA might cancel the bullish momentum.
On the downside, the initial support for EURGBP stands at 0.8906 the daily low. A close below 0.8906 might test the next support zone at 0.8860 the 50-day moving average. More support for the EURGBP might emerge at 0.8827 the low from May 15.
On the other side, first resistance for EURGBP stands at 0.8941 the daily top. A break above 0.8941 might challenge the next resistance at 0.8975 the high from May 22. If the EURGBP pair break above then might test the next supply zone at 0.9001 the high from May 21.