The EUR/GBP pair continues its recovery, bolstered by dovish comments from Bank of England (BoE) Governor Andrew Bailey, who hinted at the gradual easing of interest rates. Despite the Pound’s recent strength, the Euro capitalizes on increased expectations of rate cuts from the European Central Bank (ECB) in the coming months.
Key Takeaways:
- EUR/GBP Recovery: The pair is currently trading around the 0.8350s, showing signs of recovery after BoE’s dovish stance.
- Technical Resistance: EUR/GBP faces significant resistance levels that could cap further gains.
- ECB and BoE Dynamics: Diverging monetary policies between the ECB and BoE continue to influence the pair’s direction.
Technical Analysis
H4 Chart Analysis
- The EUR/GBP pair has been in a downtrend, with multiple Breaks of Structure (BOS) indicating strong bearish momentum. After a sharp decline, the pair has found support near the 0.8320 level, which aligns with a discount zone.
- The recent bullish correction has taken the pair back to an equilibrium zone around 0.8350, with the potential to reach the premium area near 0.8460. However, this region also coincides with significant resistance, including prior swing highs and supply zones marked by previous BOS levels.
H1 Chart Analysis
- The H1 chart reflects a similar bearish structure with multiple BOS, indicating a prevailing downward momentum. The pair recently broke through a minor support level at 0.8350, and the ensuing recovery faces resistance at the same level.
- The red zone around 0.8360-0.8380 represents a crucial area of resistance that could trigger another sell-off, especially if the pair fails to establish a higher low (HL) on the H1 timeframe.
- A further upside could see the pair testing the stronger resistance around the 0.8450 level, but bearish pressure remains dominant unless a clear Break of Structure (BoS) occurs above this zone.
Economic Data:
- BoE Influence: Governor Bailey’s comments suggesting a gradual reduction in interest rates due to falling inflation have softened the Pound, supporting the recent recovery in EUR/GBP.
- ECB Outlook: Despite weak Eurozone data, the market is increasingly pricing in a rate cut by the ECB in October, which could cap any significant Euro strength against the Pound.
Trading Recommendation
Traders should monitor the 0.8350-0.8380 resistance zone closely. A rejection here could offer a short-selling opportunity, targeting a retest of the recent lows near 0.8320. Conversely, a break above 0.8380 with strong volume could signal further upside, potentially towards the 0.8460 resistance area.
Conclusion
While EUR/GBP shows signs of recovery, the broader bearish trend remains intact. The pair faces significant resistance levels that could limit further gains unless a decisive break occurs. Traders should remain cautious and consider both technical and fundamental factors when positioning in this currency pair.
