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EUR/GBP Buyers Face Exhaustion at Key Resistance Amid Economic Uncertainty

EUR/GBP Buyers Face Exhaustion at Key Resistance Amid Economic Uncertainty

Market Overview:

EUR/GBP is navigating a complex market environment, influenced by a confluence of economic data and central bank policies. The recent decision by the Bank of England (BoE) to cut interest rates by 25 basis points has added downward pressure on the British pound, allowing the euro to gain traction. However, both the Eurozone and the UK are facing persistent economic challenges, including concerns over sluggish growth. These factors, coupled with ongoing geopolitical tensions, have created a cautious trading atmosphere, leading to a gradual ascent of the euro against the pound.

Technical Analysis

EUR/GBP has recently broken out of a 20-month downtrend and is now aiming for a four-month high. The pair is currently testing a significant resistance level at 0.86156 for the third time. A successful breakout above this resistance would open the door to the next target at 0.86265. Sustained bullish momentum could drive the pair further to the resistance levels of 0.86428 and ultimately 0.86556. However, the technical indicators suggest that buyers might be running out of steam, which could lead to a temporary retreat as they regroup.

Alternative Scenario

If the buyers fail to overcome the 0.86156 resistance level, the pair might enter a sideways consolidation phase. A retreat could push the pair towards the support levels at 0.86003 and 0.85756. A break below 0.85756 would invalidate the bullish scenario, potentially shifting the market sentiment to a more bearish outlook.

Oscillators Confirmation

In the 4-hour chart, technical indicators are starting to signal potential exhaustion in the upward momentum. The RSI is hovering near the overbought territory, indicating that the bullish forces may be weakening. Meanwhile, the MACD, although still in positive territory, shows signs of divergence, which typically suggests a loss of momentum. These signals imply that while the overall trend remains bullish, a pullback or consolidation could be on the horizon as buyers may struggle to push prices through key resistance levels.

Key Levels:

Resistance Levels:

  • Resistance 3: 0.86556
  • Resistance 2: 0.86428
  • Resistance 1: 0.86265

Current Price (at the time of analysis): 0.86164

Support Levels:

  • Support 1: 0.86003
  • Support 2: 0.85756

Fundamental Factors and Market Sentiment

The broader market sentiment is being shaped by contrasting economic data from the Eurozone and the UK. The recent interest rate cut by the BoE has put additional pressure on the pound, while ongoing concerns about the economic outlook in both regions are weighing on market sentiment. Traders are also keeping a close eye on geopolitical developments and adjustments in central bank policies, which are likely to influence the market’s direction.

Key Influencing Events

With no major economic reports scheduled for the pound, the focus shifts to inflation data from Eurozone countries, culminating in the crucial German inflation report on Friday. This data could provide significant insights into the strength of the euro and its potential to maintain its recent gains against the pound.

Conclusion

EUR/GBP is at a critical juncture as it approaches key resistance levels. While the overall trend remains upward, signs of momentum exhaustion could lead to a consolidation or pullback. Traders should watch for a breakout above 0.86156 for further bullish confirmation or a break below 0.85756 to signal a shift towards bearish sentiment. The upcoming inflation data from Germany will be pivotal in determining the euro’s near-term direction.

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