The Euro (EUR) is under renewed pressure against the British Pound (GBP) after dovish comments from European Central Bank (ECB) Governing Council member Yannis Stournaras. Stournaras advocated for an early rate cut, potentially as soon as June, which weakens the Euro compared to the Pound.
This reinforces expectations that the Bank of England (BoE) will maintain higher interest rates for longer, buoying the GBP. Recent economic data from the UK further strengthens this view, with GDP figures meeting expectations and wage growth showing signs of moderation. The market is now looking towards comments from other ECB policymakers for further clues on the Euro’s direction.
Technical Analysis
The 4-hour chart shows that the EURGBP pair’s price action currently resides at 0.85221, exhibiting a minor downtrend following recent gains. The price recently breached below the 20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line), indicating a shift in short-term momentum towards the downside. Notably, the shorter-term 20-SMA and 50-SMA have crossed below the longer-term 100-SMA, further validating the bearish sentiment.
The Relative Strength Index (RSI) stands at 46.70, having recently dipped below the 50.00 level, suggesting a slight bearish bias. Short-term trading opportunities may emerge towards the immediate support level at 0.85238 if the price action sustains pressure below the 50% Fibonacci retracement level and SMAs. Further downside momentum could target the last swing low support at 0.85021.
Conversely, failure to maintain downward pressure below the 50.00% Fibonacci retracement level could lead to short-term trading opportunities towards the initial resistance level at the last swing high of 0.85598. A break above this level may pave the way for the 0.85780 resistance level in the near term.
Summary
The dovish comments from ECB officials and expectations of a delayed rate cut in the Eurozone have weakened the Euro against the Pound. The technical outlook on the 4-hour chart also suggests a potential downside move. Short-term trading opportunities might emerge if the price can hold above the 50% Fibonacci retracement level (0.85238) for a potential push towards the last swing high (0.85598). However, a sustained break below this level could see the Euro depreciate further towards the 0.85021 support level.
Sources: TradingView, Trading Economics, Reuters, Dow Jones Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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