EUR/GBP Buyers Gain Momentum Ahead of PMI Reports
Market Overview
The euro and pound sterling have both strengthened against the US dollar in recent sessions, reflecting renewed demand for European and UK assets amid ongoing pressures on the dollar. However, the euro’s recent rally has been driven by a unique set of catalysts, placing it in a relatively stronger position compared to the pound.
A significant driver behind the euro’s recent gains is the political breakthrough in Germany, where leading political parties agreed to establish a €500 billion infrastructure fund aimed at modernising key sectors and stimulating long-term growth. This decisive fiscal commitment has enhanced confidence in the eurozone’s economic outlook, allowing the EUR/GBP pair to climb to its highest level in over a month.
Technical Analysis
On the 1-hour chart, EUR/GBP continues to follow a well-defined upward trajectory, maintaining a series of higher highs and higher lows since the start of the week. The pair has reached its highest level in over a month, with buyers now challenging a key resistance zone at 0.83119, which marks the previous local peak.
The pair’s upward momentum has been reinforced by consistent support from the short-term moving averages, which remain firmly aligned in bullish formation. Notably, the RSI has entered overbought territory for the third consecutive time, underscoring strong buying pressure. However, the frequency with which the RSI has reached overbought levels could also signal that the rally may be approaching a temporary exhaustion point.
If buyers successfully break above 0.83119 on sustained momentum, the next upside targets align at 0.83155, followed by 0.83201 and 0.83252, with each level representing incremental technical hurdles derived from prior price action and short-term Fibonacci extensions.
Conversely, failure to breach resistance may trigger a corrective pullback, initially targeting 0.83068. A decisive break below this support would expose the pair to a deeper retracement, potentially revisiting 0.82986, which coincides with the lower bound of the recent consolidation zone.
Key Technical Levels
- Resistances: 0.83155, 0.83201, 0.83252
- Supports: 0.83068, 0.82986
Fundamental Drivers
The near-term outlook for EUR/GBP will be shaped by a series of PMI reports from both the eurozone and the UK, scheduled for release later today. In the euro area, the Services PMI is expected to remain above the critical 50-mark, indicating continued expansion in the services sector. However, analysts anticipate a modest decline compared to the previous month, reflecting a potential cooling in demand.
In contrast, the UK Services PMI is projected to improve slightly, driven by resilient consumer demand and increased business confidence following recent signs of stabilization in the UK economy. A stronger-than-expected reading could provide near-term support to the pound, challenging the euro’s dominance.
Conclusion
EUR/GBP remains in a well-established uptrend, with buyers firmly in control, provided they secure a breakout above 0.83155. However, failure to breach resistance could spark a corrective decline, particularly if UK PMI data outperforms expectations.
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