On Tuesday, the EURGBP currency pair flirted with its lowest levels in four months, reflecting the prevailing belief that the Bank of England (BoE) may be slower to reduce rates compared to the European Central Bank (ECB).
Recent indicators of the UK economy suggest resilience, with an unexpected uptick in inflation fuelling speculation that the BoE might delay its easing plans. The upcoming ECB interest rate decision on Thursday holds the key to validating or challenging the consensus regarding the ECB’s timing for easing. While no rate changes are anticipated, the significance lies in the commentary’s tone. Given the recent decline in the EURGBP pair, a more assertive stance from the ECB tomorrow could act as a catalyst for a potential rebound.
Technical
On the 4H chart, a descending triangle has formed, with the psychological baseline support at 0.8549 currently underpinning the price. With a pivotal interest rate decision due tomorrow, we could see some consolidation around this level in the upcoming session.
The pattern usually signals the potential for a breakdown, and any movement below 0.8549 could trigger this bearish run toward 0.8536. A retracement to retest the breakdown level is possible at this level, but an additional breakdown could send the pair toward lower resistance at 0.8518 and 0.8504.
However, should the triangle support hold, the pair could rebound toward 0.8564, where the 25-SMA (green line) converges with the dynamic resistance of the triangle, creating a psychological level for the bulls to cross in order to emerge from the triangle. Clearance of this resistance could trigger a breakout toward 0.8581, the 50-SMA (blue line) and 0.8587. If the breakout is sustained, the supply zone at 0.8619 could become a likely destination in the upcoming sessions as the pair recovers from its multi-month lows.
Summary
The EURGBP teased 4-month lows on Tuesday, as the divergence between the respective central banks’ outlook on monetary policy has given the British Pound some strength. However, all is on the line with the ECB interest rate decision tomorrow, with the triangle support at 0.8549, a crucial level to keep an eye on.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.
Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.
CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdictions where international sanctions or local regulatory requirements restrict or prohibit them.
