EURGBP upside looks limited, leaving it vulnerable to further losses

EUR/GBP extended a modest recovery on Tuesday, finding support near 0.8650, but overall momentum remains weak as investors await interest rate decisions from the ECB and BoE. The pair reached a weekly high of 0.8676 in early New York trading before easing back, currently trading around 0.8665.

EURGBP Could See Volatility on BoE and ECB Meeting

The European Central Bank and the Bank of England meet this week to announce their latest interest rate decisions. The ECB and BoE are expected to keep rates unchanged amid rising inflation and slowing growth. Market focus will be on press conferences by ECB President Lagarde and BoE Governor Bailey for guidance on future policy, with the possibility of summer hikes to manage inflation expectations heightened by energy price disruptions and geopolitical tensions. The recent data showed Eurozone inflation expectations jumping to 4.0%—the biggest rise since early 2022.

EURGBP Technical Forecast

The technical outlook for the EURGBP pair remains negative, and only a daily close above the 100-day moving average at 0.8685 might cancel the bearish trend. Therefore, if the bearish sentiment continues, the first support for the currency pair stands at 0.8645, the 5-week low. A break below 0.8645 might test the next support at 0.8630. If the pair breaks below, then it might challenge the next demand zone at 0.8610, the yearly low.   

On the flip side, the initial resistance for EURGBP stands at 0.8676, the weekly top. A close above 0.8676 might challenge the next resistance area at 0.8685, the 100-day moving average. More resistance for the EURGBP might emerge at 0.8690/0.8700.

In summary, the currency pair is trading significantly below the 50, 100, and 200 simple moving averages (SMAs), indicating a bearish trend. To gain confidence in a potential upward move, we need to reclaim the 100 SMA. Until that happens, the strategy is to sell any bounces that occur near this level.

Warning! This material is not intended as investment advice. Past performance data does not guarantee future returns. Investing in foreign currencies may affect your returns due to their fluctuations. Any transaction in securities may result in both profits and losses. The assumptions and expectations set forth in this material are only estimates that may not be accurate and may change depending on current economic conditions. These statements do not guarantee future returns.