EUR/GBP Slips to 0.8383, Manufacturing & Services PMI in Highlights
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- EUR/GBP reversed its direction and lost all of its daily gains to drop to its lowest level since February 2020.
- Germany is considering a complete lockdown on vaccinated people as the health situation around the country is getting worse.
- EUR/GBP can exhibit a selling trend upon a breakout of 0.8383 double bottom pattern level.
The cross-currency pair EUR/GBP is trading with a bearish bias at the 0.8320 level. The coming week is likely crucial for EUR/GBP as the European and UK economy is scheduled to publish Manufacturing & Services PMI. The day before, EUR/GBP closed at $0.8389 after hitting a high of $0.8427 and a low of $0.8383.
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EUR/GBP price review – Covid19 fears in-play
EUR/GBP reversed its direction and lost all of its daily gains to drop to its lowest level since February 2020. On the week’s final trading day, EUR/GBP turned sharply lower and moved around its 21-month lowest level. The underperformance of the single currency drove the recent downturn in Euro. It came after concerns about a rapid deterioration in the Eurozone economy started to emerge amid a resurgence of pandemics in the continent.
Austria has announced that it will re-impose the fourth lockdown starting Monday for 20 days. The restrictions will then continue on the unvaccinated people as the country has said that all citizens will be required to be vaccinated by February 1, 2022, or else the people will be fined.
Meanwhile, Germany is also considering a complete lockdown on vaccinated people as the health situation around the country is getting worse. The rising coronavirus across Europe kept the Euro currency under pressure over the week, which ultimately dragged the EUR/GBP pair further to the downside on the last day of the week.
A quick economic outlook
At 05:01 GMT, GfK Consumer Confidence dropped to-14 against the forecasted-18 and supported the British Pound, adding a further loss in EUR/GBP.
At 12:00 GMT, retail sales surged to 0.8% against the projected 0.5% and supported the British pound. The Public Sector Net Borrowing rose to 18.0B against the predicted 12.2B and weighed on the British Pound, which caused a further loss in EUR/GBP .
From the European side, at 12:00 GMT, German PPI surged to 3.8% against the projected 2.0% and supported the Euro, preventing further loss in EUR/GBP. At 14:00 GMT, the current account also rose to 18.7B against the predicted 16.2B, which supported the Euro and limited the decline in EUR/GBP.
ECB President Christine Lagarde remarks
European Central Bank President Christine Lagarde said that conditions to raise them were improbable to be satisfied next year. She warned that the ECB must not rush into a premature tightening of monetary policy.
Following these comments from Lagarde, the Euro fell sharply against its rival currencies and added further losses in the EUR/GBP currency pair. Bundesbank President Jens Weidmann also warned that inflation might stay above 2% for some time. She suggested that the ECB avoid any commitment to keep the money taps open. These comments also kept the Euro under pressure and dragged EUR/GBP further to the downside. The main reason behind the downward momentum in EUR/GBP was the weakness of the single currency euro.
A senior British minister shared concerns about increased chances that London could break an impasse with the EU on the UK front. It’s likely to happen under the post-Brexit trade arrangements for Northern Ireland without triggering emergency measures to safeguard the movement of goods.
This came after both sides agreed to intensify efforts to resolve Northern Ireland trade issues this week. This optimism kept the British pound strong against the euro currency and dragged the EUR/GBP pair further to the downside.
Manufacturing & Services PMI in highlights
A flood of PMI business surveys due on Tuesday could finally persuade investors that the ECB is unlikely to boost interest rates next year. With increased trade restrictions, increasing inflation eating into profit margins, and China’s downturn, there’s a good chance the PMIs will fall much further, throwing another blow to the already battered Euro.
Last but not least, the release of November PMIs on Tuesday may cause some volatility in the British pound. Sterling has been the only major currency to retain its nerve in the face of the dollar’s recent onslaught, even reaching new post-pandemic highs against the euro.
EUR/GBP daily technical levels
Support Resistance
0.8393 0.8440
0.8365 0.8457
0.8347 0.8486
Pivot Point: 0.8411
EUR/GBP technical outlook – Eyes on manufacturing & services PMI
The EUR/GBP is trading with a strong bearish bias at the 0.8382 level on the technical front. Closing of candles below 0.8430 level supports a selling bias in the pair.
On the 4-hour timeframe, the EUR/GBP pair has formed a descending triangle supporting the pair at 0.8383 level. The break below the double bottom support level can trigger further selling until the 0.8343 level. At the same time, the resistance continues to stay at the 0.8430 level.
On the higher side, the breakout of the 0.8430 level can lead the EUR/GBP price towards the 0.8464 level. Lastly, there’s a divergence between the RSI and stochastic indicators as one suggests a buy trade while the other suggests a sell.
Thus, the pair can exhibit a selling trend upon a breakout of 0.8383 double bottom pattern level. It’s essential to keep an eye on the UK and European manufacturing and services PMI figures for further trends.
