EUR/GBP Completes 61.8% Fib Retracement – Who’s Up for a Buy Trade?
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- German WPI surged to 2.3% against the forecasted 0.5%, supported the Euro, and capitulated further losses in EUR/GBP.
- Industrial production rose to 0.3% against the projected 0.1% and supported the GBP.
- EUR/GBP is trading at 0.8364, retesting the previously violated double top resistance at 0.8630 on the 4-hour chart.
The EUR/GBP was closed at 0.8367 after reaching a high of 0.8432 and a low of 0.8358. The EUR/GBP extended its loss on Friday and dropped to its one-week lowest level due to the strength of the British Pound. According to the ECB Governing Council member Ignazio Visco, the impact of the energy price shock should gradually wane in 2023. He stated that the European Central Bank would maintain a flexible approach as it exits its ultra-expansionary monetary policy, keeping an eye on inflationary threats and the risks of disparities in financing conditions across eurozone countries. He said that the debate over inflation among ECB members has already started, and it has been a good debate.
Meanwhile, German Vice-Chancellor and economics minister Robert Habeck said that Europe might be on the verge of war. These comments from the German Chancellor put additional downward pressure on the single currency euro, resulting in further losses in the EUR/GBP.
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The economic event outlook
From the European side, on the data front, at 12:00 GMT, the German Final CPI remained flat at 0.4%. The German WPI surged to 2.3% against the forecasted 0.5%, supported the Euro, and capitulated further losses in EUR/GBP. From the British side, at 12:00 GMT, the prelim GDP for the quarter dropped to 1.0% against the projected 1.1% and weighed on the British Pound. The construction output surged to 2.0% against the forecasted-0.6% and supported the British Pound. The GDP came in at -0.2% against the forecasted -0.5% and supported Sterling. The Goods Trade Balance remained flat with expectations of-12.4B. The index of services was also unchanged at 1.2%.
Industrial production rose to 0.3% against the projected 0.1% and supported the GBP. Manufacturing production was also unchanged at 0.2%. At 14:30 GMT, the prelim business investment surged to 0.9% against the forecasted 3.0% and supported the GBP. At 18:03 GMT, the NEISR GDP estimate came in at 0.9%, against the previous 1.0%. Most of the data from the UK was favorable, which ultimately added more strength to the rising prices of the GBP/USD.
Furthermore, the British Pound was also getting strength from reports suggesting that British employers expected to increase staff pay by the most in at least nine years. Wage pressure was being reduced by more employers providing flexible hours, training, and support for employees’ health. According to a survey, 70% of employers planned to recruit in the first quarter of 2022, and only 11% planned redundancies. In addition, the reports of potential increases in wages of UK employees by their employers added more strength to the British Pound and dragged the currency pair EUR/GBP further to the downside.
EUR/GBP price forecast –Daily Technical Levels
Support Resistance
0.8361 0.8381
0.8349 0.8389
0.8342 0.8401
Pivot Point: 0.8369
EUR/GBP price forecast – Downward trendline breakout at 0.8420
The EUR/GBP is trading at 0.8364, retesting the previously violated double top resistance at 0.8630 on the 4-hour chart. This level is now acting as a support for EUR/GBP. In the 4-hour timeframe, the EUR/GBP currency pair has completed the 61.8% Fibonacci retracement. The closing of candles above the 61.8% fib level supports the chances of a bullish trend in the EUR/GBP currency.
On the 4-hourly timeframe, the EUR/GBP pair is trading below the 50 EMA (exponential moving average), extended by a solid resistance at the 0.8400 level. On the other hand, the cross-currency pair is gaining strong support at the 0.8364 level. A surge in selling pressure can trigger a bearish breakout below the 0.8364 level, exposing the currency pair towards the next support level of the 0.8322 level.
Looking at the leading technical indicators, the RSI and MSCD stay under 50 and 0, respectively. This indicates that the currency pair is still trading with a bearish bias. Therefore, the violation of 0.8364 helps traders capture a sell trade.
All the best, and stay tuned for more updates!
