EUR/GBP Breaks Below Trendline at 0.8535, Eyes on BOE Gov Bailey Speech

• UK Prime Minister Boris Johnson appears to back away from the European Court of Justice’s (ECJ) role in enforcing the Northern Ireland Protocol.
• ECB might surprise markets by changing its bond-purchasing techniques, despite the MPC members’ differing opinions.
• A spike in demand above 0.8488 may trigger a rebound in the cross-currency pair.

The cross-currency pair EUR/GBP failed to extend its upward momentum, and it’s trading at the 0.8506 level now. The bearish momentum continues to dominate ahead of BOE Gov. Bailey’s speech. 

During the previous week, the market’s risk-on mood tended to benefit the cross-currency pair. For instance, the EUR/GBP pair appears to be reacting to the latest Brexit and virus reports in the UK by recovering its intraday low. While the UK’s escalation of virus-related activity restrictions from level 3 to level 4 attracts particular attention.

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Boris Johnson seems to be backing away from the ECJ 

UK Prime Minister Boris Johnson appears to be backing away from the European Court of Justice’s (ECJ) role. He doesn’t seem to be enforcing the Northern Ireland Protocol. However, the failure to progress in recent discussions over medical supply and the British-French spat over fishing permits. Thus, it’s keeping Brexit anxieties high and contributing to the cross-currency pair’s gains. Furthermore, the US dollar’s recent pullback in response to US inflation data provides counter-strength to the Euro, favouring EUR/GBP investors. The EUR/GBP currency pair is trading at 0.8538 and consolidating in the range between 0.8521 and 0.8538. 

UK’s to raise restriction from level 3 to 4

The UK’s decision to raise the limits of the virus-related restriction from level 3 to level 4 has attracted much attention. As per the most recent official figures, 1,239 new omicron cases were reported today, bringing the total number of patients in the country to 3,137. This is the most significant daily increase in the virus variant instances since its discovery in the UK.

Despite this, UK Prime Minister Boris Johnson appears optimistic about resolving the crisis, urging residents over 30 to receive coronavirus vaccine booster doses. The cross-currency pair reacts to the latest Brexit and virus reports and helps the cross-currency pair stay bid.

In a second story, UK Prime Minister Boris Johnson appears to be moving away from eliminating the European Court of Justice’s (ECJ) role in implementing the Northern Ireland Protocol. However, the lack of progress in recent negotiations over medical supply and the British-French spat over fishing permits kept Brexit anxieties heightened and contributed to the EUR/GBP pair’s gains.

BoE policymakers expressed concerns over COVID-19.

Policymakers at the Bank of England (BoE) have previously expressed concerns about the virus’s spread and are unlikely to play any significant roles at this week’s monetary policy meeting. Alternatively, the European Central Bank (ECB) might surprise markets by changing its bond-purchasing techniques, despite the Monetary Policy Committee’s (MPC) members’ differing opinions. Moreover, the US dollar’s recent pullback in response to US inflation data provides counter-strength to the Euro, favouring EUR/GBP investors of late.

Looking forward, the light schedule at home will limit intraday swings in the EUR/GBP pair, although risk catalysts will be the most important thing to watch.

BoE Gov Bailey Speech ahead

The Bank of England Governor Andrew Bailey is due to hold a press conference about the Financial Stability Report in London. Being a head of the central bank (BoE), which regulates short-term interest rates, he most influences the value of the country’s currency. Traders pay close attention to his public appearances since they frequently deliver subtle hints about future monetary policy.

EUR/GBP daily support and resistance levels

S3 0.8479

S2 0.8507

S1 0.8518

Pivot Point 0.8536

R1 0.8546

R2 0.8564

R3 0.8592

EUR/GBP trade plan and technical outlook

The EUR/GBP is trading at 0.8503, having violated the double bottom support level at 0.8538. However, for the moment, the support level has flipped to resistance. Therefore, the EUR/GBP pair will likely face a substantial hurdle at the 0.8538 level.

In the 4-hour timeframe, the EUR/GBP pair’s significant resistance stays at the 0.8540 level. The formation of candles below 0.8540 indicates weakness in the uptrend; thus, the cross-currency pair can retrace to the 0.8480 level.

A spike in demand above 0.8488 may trigger a rebound in the cross-currency pair. Technical indicators such as RSI and MACD support a strong selling trend. For instance, the RSI holds below 50 while the MACD is trading under the 0 level. 

Moreover, the 50-day EMA (exponential moving average) suggests odds of a downswing in EUR/GBP. A slice below 0.8488 can create additional room for a downtrend until 0.8449. A rise in EUR/GBP selling pressure could trigger more selling below 0.8449 until the next support at 0.8410. On the other hand, increased buying pressure at the current market price can drive an uptrend until the 0.8538 or 0.8595 resistance. All the best, and stay tuned for more updates!