EUR/GBP Faces Critical Support as Sellers Dominate Amid Market Turmoil
Date: Tuesday, June 25, 2024
Tuesday Market Overview:
On Tuesday, the British pound emerged as one of the best-performing major currencies. This performance was driven by a sell-off in equity markets and political tensions on both sides of the Atlantic, which diverted investors towards safer currencies, excluding the US dollar. The significant 10% drop in Nvidia’s shares over the past two trading days disheartened the market, pushing more capital towards government bonds and the dollar. Meanwhile, with the UK general election scheduled for July 4, the Bank of England’s policymakers are unlikely to introduce any new rate decisions. Traders have factored in a roughly 55% chance of the first rate cut in August, anticipating two rate cuts by year-end.
Technical Analysis:
On the four-hour chart, the euro has continued to weaken against the pound after breaking its two-week ascending trendline during Tuesday morning’s European session. This decline has brought the EUR/GBP pair to test the critical support level at 0.84499. Continued bearish momentum depends on a clear break below this key level. If sellers manage to close below this support, the immediate price target will be 0.84424. Failure to hold at this level could further push the price towards the support zone between 0.84311 and 0.84223.
Alternative Scenario:
If the support at 0.84499 holds, buyers might find renewed strength to test the resistance at 0.84604. Overcoming this resistance could lead to a recovery towards the higher resistance at 0.84775.
Market Overview and Key Levels
Resistance Levels:
- Resistance 2: 0.84775
- Resistance 1: 0.84604
Current Price (at the time of analysis): 0.84509
Support Levels:
- Support 1: 0.84424
- Support 2: 0.84311
- Support 3: 0.84223
Impactful Events:
While no major economic data from Europe is expected, investors are keenly watching for the US Consumer Confidence Index and Canadian inflation data. Additionally, a speech by Mr. Bowman from the Federal Reserve is on the agenda. Consequently, price movements are likely to be more influenced by technical factors in the short term.
Oscillators and Risk Warnings:
- RSI (Relative Strength Index): Bearish, indicating ongoing selling pressure.
- MACD (Moving Average Convergence Divergence): Mixed, suggesting indecision in momentum.
- Moving Averages: Mixed, reflecting current market uncertainty.
Conclusion:
The EUR/GBP pair is at a critical juncture, testing a significant support level amid broader market volatility and political uncertainty. A break below 0.84499 could confirm further downside potential, with targets at 0.84424, 0.84311, and 0.84223. Conversely, if this support holds, a rebound towards 0.84604 and potentially 0.84775 could occur.
Traders should closely monitor the upcoming US Consumer Confidence Index, Canadian inflation data, and the Fed’s commentary for any indications that could influence market sentiment and drive further price action. By staying attuned to these technical levels and broader economic indicators, investors can navigate the current market dynamics more effectively.