EUR/GBP Remains At Risk Of More Declines

Key Highlights

  • The Euro started a significant decline below the 0.9000 support against the British Pound.
  • EUR/GBP could face resistance near 0.8900 and a bearish trend line on the 4-hours chart.
  • The Euro Zone CPI increased 0.1% in August 2019 (MoM), less than the +0.2% forecast.
  • The UK Retail Sales might increase 2.9% in August 2019 (YoY), less than the last +3.3%.

EUR/GBP Technical Analysis

This past month, the Euro failed to break the 0.9150 resistance against the British Pound. As a result, the EUR/GBP pair started a downtrend and recently declined heavily below the 0.9000 support.

EUR/GBP Technical Analysis Euro British Pound

Looking at the 4-hours chart, the pair settled well below the 0.8950 support and the 100 simple moving average (red, 4-hours). The recent decline was such that the pair even broke the 0.8900 support area.

A new 3-month low was formed near 0.8819 and the pair is currently consolidating losses. On the upside, there is a strong resistance forming near the 0.8900 level. Furthermore, the 50% Fib retracement level of the last major decline from the 0.8974 high to 0.8819 low is near 0.8900.

More importantly, there is a bearish trend line forming with resistance near 0.8920. Therefore, upsides in EUR/GBP are likely to face hurdles near the 0.8900 and 0.8920 levels.

On the downside, an immediate support is near the 0.8840 level, below which the pair could accelerate its decline towards the 0.8800 support area.

Fundamentally, the Euro Zone CPI report for August 2019 was released by the Eurostat. The market was looking for a 0.2% rise in the CPI compared with the previous month.

The actual result was lower than the forecast, as the CPI increased 0.1%. Looking at the yearly change, the CPI rose 1%, similar to the forecast and the last reading.

The report added:

The lowest annual rates were registered in Portugal (-0.1%), Greece (0.1%) and Spain (0.4%). The highest annual rates were recorded in Romania (4.1%), Hungary (3.2%), the Netherlands and Latvia (both 3.1%).

Moreover, the UK CPI report was also released recently. The market was looking for a 0.5% rise in the CPI compared with the previous month.

In actual, the UK CPI was up 0.4% considering it was flat last month. Looking at the yearly change, the CPI rose 1.7%, less than the last 2.1% and also lower than the 1.9% forecast.

Overall, the EUR/GBP might correct higher, but it is likely to face resistance near 0.8900 and 0.8920 in the near term. Looking at GBP/USD, the pair is showing positive signs above 1.2400, but EUR/USD is still struggling below 1.1100.

Upcoming Economic Releases

  • UK Retail Sales for August 2019 (YoY) – Forecast +2.9%, versus +3.3% previous.
  • UK Retail Sales for August 2019 (MoM) – Forecast 0.0%, versus +0.2% previous.
  • BoE Interest Rate Decision – Forecast 0.75%, versus 0.75% previous.
  • US Initial Jobless Claims – Forecast 213K, versus 204K previous.

Aayush Jindal

Aayush is a Senior Forex, Cryptocurrencies and Financial Market Strategist with a background in IT and financial markets. He specialises in market strategies and technical analysis, and has spent over a decade as a financial markets contributor and observer. He possesses strong technical analytical skills and is well known for his entertaining and informative analysis of the currency, commodities, Bitcoin and Ethereum markets.

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