The EURGBP currency pair has experienced some tension lately due to the British Pound’s strength, causing downward pressure. However, a period of consolidation has emerged, signalling a pause as the pair seeks its next move.
This consolidation phase aligns with the anticipation of a busy week ahead. The UK is gearing up for a series of important economic data releases, including labour market updates, inflation figures, and GDP statistics. Similarly, the Eurozone is poised to unveil its own GDP data. With both central banks unsure about the timing of potential rate cuts, the upcoming week holds significant potential for shaping the future trajectory of the currency pair.
Technical
On the 4H chart, the trading range has formed between support at 0.8521 and resistance near 0.8550. The 25-SMA (green line) and 50-SMA (blue line) have somewhat converged, with declining volumes confirming the uncertainty in the market over the next directional move.
As things stand, the 50-SMA offers resistance at 0.8539. If the pair remains below this level, the momentum could drive the pair to test the support at 0.8521. This psychological support could once again act as a pivot point for a rebound to remain within its current range and continue moving sideways in anticipation of next week’s economic data. Should the support fail, a breakdown could bring 0.8515 into the spotlight, with neckline support established at 0.8506 if the bearish momentum is sustained.
However, any movement above the 50-SMA and 25-SMA could trigger a test of resistance at 0.8550. A breakout toward 0.8558 could then be on the cards, and if this resistance fails to trigger a retracement, the market could look toward the Fibonacci midpoint at 0.8566. The 61.8% Fibonacci golden ratio could become a level of interest if the bullish momentum is sustained at 0.8578.
Summary
The EURGBP currency pair is consolidating after a prolonged downturn. With a busy week ahead next week, the consolidation could continue in the closing session, with a range established between 0.8521 and 0.8550.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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