EUR/GBP downward channel breakout, Brace for an uptrend above 0.8380

• The British government has asked public sector managers to evaluate their contingency plans against a worst-case scenario of 25% worker absence.
• China’s real-estate firm Evergande, which has come to a halt, weighs on the market mood.
• The EUR/GBP  is trading at 0.8405, having violated the downward channel pattern at 0.8380.

In today’s Asian trading session, the EUR/GBP currency pair failed to stop its downward trend. As escalating concerns about the South African COVID variant were seen as significant burdens weighing on the EUR/GBP, it remained well offered around an intraday low near 0.8386.So far, the European currency has struggled to acquire traction and has remained at the mercy of US dollar price fluctuations. This was viewed as yet another reason for the EUR/GBP exchange rate to fall.

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COVID-19 concerns: Omicron continues to remain under the spotlight 

On the other hand, the British government has asked public sector managers to evaluate their contingency plans against a worst-case scenario of 25% worker absence as part of attempts to reduce disruption caused by the rapid spread of the COVID-19 Omicron form. According to the news, the government is concerned that the record-high daily infections would cause disruptions in business and public services. Therefore, the announcement should bring the EUR/GBP pair’s losses to a halt. At this time, the EUR/GBP pair is trading at 0.8391 and consolidating in the range between 0.8386 and 0.8413.

The EUR/GBP cross met with further supply on Monday after an early advance to the 0.8400 area, extending its recent bearish trend. Concerns regarding the potential economic impacts of the escalating COVID-19 cases were considered the main factor placing pressure on the EUR/GBP cross. Covid infections in the eurozone and worldwide are on the rise, threatening the old continent’s recovery possibilities. “Worldwide infections touched a record high over the past seven days,” Reuters said, “with an average of a little over a million cases recorded every day between December 24 and December 30.” As a result, “over 4,000 flights were canceled around the world on Sunday, more than half of the US flights,” according to the news. “This adds to the toll of holiday travel difficulties owing to severe weather and the rise in COVID-19 cases.”

China Evergrande shares have been halted.

The news that China’s troubled real-estate firm Evergande has come to a halt also weighs the market mood. In addition, the Chinese government has ordered the corporation to demolish 39 unauthorized residential buildings. According to Reuters, “China Evergrande Group shares will be stopped from trading on Monday due to publication of “inside information.” Thus, the ongoing geopolitical tension and escalating fears concerning the South African COVID variant were seen as significant burdens weighing on the EUR/GBP.

The British government’s stance on spiked COVID cases

The British government has ordered public sector managers to test their contingency plans against a worst-case scenario of 25% worker absence. That’s as part of measures to limit disruption from the rapid spread of the Omicron strain of COVID-19. “As a result, the administration is concerned that the record high daily infections may cause disruptions in business and public services. The news is expected to help the EUR/GBP currency pair limit its losses by weighing the pound. On the other hand, holidays in the UK and most Asia-Pacific economies reduce the impact of the news.

Moving on, the monetary policy difference between the US Federal Reserve (Fed) and the European Central Bank (ECB) is the key to monitoring in 2022. The Fed is likely to tighten monetary policy faster than the ECB. That might put downward pressure on EUR/GBP prices. As a result, the Federal Open Market Committee (FOMC) Meeting Minutes on Wednesday. Alongside, the US Nonfarm Payrolls (NFP) on Friday will be critical for pair traders. In addition, the final December readings of the US Markit Manufacturing PMI may provide immediate guidance to markets for the day.

EUR/GBP price forecast –Daily Support and Resistance

S3 0.8371
S2 0.8386
S1 0.8392
Pivot Point 0.8402
R1 0.8407
R2 0.8417
R3 0.8433

EUR/GBP price forecast – Downward channel breakout at 0.8380 

The EUR/GBP  is trading at 0.8405, having violated the downward channel pattern at 0.8380. Thus, the resistance level has flipped to support. Therefore, the EUR/GBP pair will probably major support at the 0.8380 level. In the 4-hour timeframe, the EUR/GBP pair’s significant resistance stays at the 0.8420 level.

On the 4-hour timeframe, the EUR/GBP is consolidating in a narrow trading range of 0.8420 to 0.8380 level. A breakout of this range will determine further price action in the EUR/GBP pair. On the bullish side, the breakout of 0.8420 level exposes the pair towards 0.8460 or 0.8498 level. 

A surge in demand over 0.8480 may begin a rebound in the cross-currency pair. Technical indicators like RSI and Stock RSI signal chances of an uptrend continuation. RSI is holding heading towards 50, indicating a bullish bias, while the Stoch RSI is already holding at 74. Well, the choppy session continues primarily because of the holiday session around the globe.  

On the 4-hour timeframe, the EUR/GBP the break below 0.8380 level can trigger a downtrend until the 0.8340 support level. Further on the lower side, the next support will prevail at 0.8280. Moreover, the 50-day EMA (exponential moving average) signals the odds of a downswing in EUR/GBP. Thus, the breakout of 0.8380 support can create additional room for a downswing until 0.8340 or 0.8280. On the other hand, increased buying pressure at the current market price can drive an uptrend until the 0.8460 or 0.8489 resistance. All the best, and stay tuned for more updates!