EUR/GBP Approaching Key Support Ahead of Important Events

Key Highlights

  • EUR/GBP started a downside correction after a sharp rally towards 0.9300.
  • The pair traded below a key bullish trend line at 0.9180 on the 4-hours chart.
  • The UK CPI increased 0.2% in August 2020 (YoY), whereas the market forecast was 0%.
  • The Euro Zone CPI for August 2020 will be released today (market forecast is -0.2% (YoY)).

 

EUR/GBP Technical Analysis

This month, the Euro gained bullish momentum above the 0.9000 resistance against the British Pound. EUR/GBP rallied towards the 0.9300 resistance and recently started a downside correction.

Looking at the 4-hours chart, the pair traded to a new multi-week high at 0.9291, and settled well above both the 200 simple moving average (green, 4-hours) and the 100 simple moving average (red, 4-hours).

Recently, the pair started a downside correction and traded below the 0.9200 support. Moreover, there was a break below a key bullish trend line at 0.9180 on the same chart. The pair traded below the 38.2% Fib retracement level of the upward move from the 0.8866 low to 0.9291 high.

It seems like the pair is approaching a couple of important supports near 0.9070 and 0.9060. The 50% Fib retracement level of the upward move from the 0.8866 low to 0.9291 high is also near 0.9060.

Any further losses could start a sustained downward move below 0.9000. Conversely, the pair could find bids near 0.9070 and start a fresh increase towards 0.9200 or even higher.

Fundamentally, the UK Consumer Price Index for August 2020 was released yesterday by the National Statistics. The market was looking for no change in the CPI compared with the same month a year ago.

The actual result was above the market forecast, as the UK CPI increased 0.2% (YoY). The monthly change was negative, as the CPI declined 0.4%, but less than the market forecast of -0.6%.

Overall, EUR/GBP is approaching key supports heading into the BoE interest rate decision and the Euro Zone CPI. Looking at GBP/USD, the pair started an upside correction above the 1.2900 resistance, but facing many hurdles near 1.3000.

Upcoming Economic Releases

  • Euro Zone CPI for August 2020 (YoY) - Forecast -0.2%, versus -0.2% previous.
  • Euro Zone CPI for August 2020 (MoM) - Forecast -0.4%, versus -0.4% previous.
  • BoE Interest Rate Decision - Forecast 0.1%, versus 0.1% previous.
  • US Initial Jobless Claims - Forecast 850K, versus 884K previous.