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EUR/GBP Buyers Strive for Market Control Amid Diverging Economic Data

EUR/GBP Buyers Strive for Market Control Amid Diverging Economic Data

Friday Market Overview:

The British pound weakened against the euro during Friday’s European trading session following slower growth in UK retail sales indices and rising producer inflation in Germany. This dynamic has set the stage for potential gains in the EUR/GBP pair.

Technical Analysis:

On the four-hour chart, EUR/GBP has formed an inverse head and shoulders pattern, marked by a higher low at 0.84033. Confirmation of this reversal pattern depends on the price reaching and surpassing the neckline around 0.84273. Sustained bullish momentum breaking through this key resistance could pave the way for further advances towards 0.84339 and ultimately 0.84441.

Alternative Scenario:

If the price fails to breach the 0.84222 resistance, it could pull back to the supports at 0.84150 and the critical low at 0.84033. A break below the right shoulder of the inverse head and shoulders pattern would invalidate the bullish reversal setup.

Key Levels:

Resistance Levels:

  • Resistance 3: 0.84441
  • Resistance 2: 0.84373
  • Resistance 1: 0.84339

Current Price (at the time of analysis): 0.84222

Support Levels:

  • Support 1: 0.84150
  • Support 2: 0.84033

Impactful Events:

Key events influencing the market on the last trading day of the week include Canadian retail sales data and a speech by Federal Reserve official Wallace. Depending on the sensitivity of the euro and pound to the US dollar, these events could impact the EUR/GBP pair.

Oscillators and Risk Warnings:

RSI (Relative Strength Index): Bullish, indicating continued buying interest.

MACD (Moving Average Convergence Divergence): Bullish, supporting the upward trend.

Moving Averages: Mixed, reflecting the current consolidation and potential for a breakout.

Conclusion:

The EUR/GBP pair is positioned for potential upside as it tests critical resistance levels following mixed economic data from the UK and Germany. Successfully breaking through 0.84273 could lead to further gains towards 0.84339 and 0.84441. However, a failure to surpass 0.84222 could see the pair retreating to supports at 0.84150 and 0.84033, invalidating the bullish setup.

Investors should monitor Canadian retail sales data and the Federal Reserve speech for further market direction, keeping an eye on how these events influence the euro and pound relative to the US dollar. Staying attuned to these key events and technical levels will help traders navigate the current market environment effectively.

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