- EUR/GBP is still evolving within a major sideways range since August 2017 with its key resistance and support at 0.9300 and 0.8300.
- A minor downtrend phase has started to develop from its 3 February 2023 high of 0.8979.
- Short-term downside momentum remains intact below 0.8750 key short-term resistance.
Since the start of this week, the EUR/GBP cross pair has continued its drop by 0.9% to print its current intraweek low of 0.8671 where market participants anticipant that the Bank of England (BoE) is likely to maintain its hawkish monetary policy stance throughout 2023 after its monetary policy decision due later today.
It is widely expected that BoE will hike its policy interest rate by another 25 basis points to 4.5%, its 12th consecutive rise and it is still way behind a red-hot March CPI print of 10.1% year-on-year inflationary growth for the UK.
Let’s now take a look at the recent EUR/GBP movements from a technical analysis perspective.
Fig 1: EUR/GBP trend as of 11 May 2023 (Source: TradingView, click to enlarge chart)
Since its 3 February 2023 high of 0.8979, the EUR/GBP cross rate has started to evolve into a minor downtrend phase with the upper and lower limits of its short-term descending channel at 0.8865 and 0.8630 respectively. In the longer-term (monthly chart), it is still trapped inside a major sideways range configuration since August 2017.
Since last Friday, 5 May, its price actions have broken and traded below the key 200-day moving average now acting as a resistance at around 0.8730. In addition, the 4-hour RSI oscillator has rebounded from its recently reached oversold region (below 30%) but has not formed any bullish divergence signal yet.
In addition, the 4-hour RSI is still capped below by a corresponding descending resistance at the 50% level. These observations suggest that short-term downside momentum remains intact. The next intermediate support to watch will be at 0.8630 and a break below it exposes the next support at 0.8570.
However, a clearance above 0.8750 short-term pivotal resistance negates the bearish tone to see the descending channel resistance coming in at around 0.8865 which also confluences with the minor swing high areas of 23 March/27 April 2023.
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Kelvin Wong