EUR/GBP Bounces-off above 0.8335 – Daily technical outlook

• Officials from the European Central Bank (ECB) have recently become more vocal.
• Prime Minister Boris Johnson is precarious, having received several calls to resign, including from within his own Conservative Party.
• EUR/GBP is trading at 0.8358, having violated the descending triangle pattern on the 4-hour chart.

During an early European trading session, the EUR/GBP currency pair managed to extend its early-day winning streak. It hit an intra-day high above the $0.8350 level. The EUR/GBP currency pair has regained its upward momentum as market participants resume their risk-on strategy. Previous outcomes help with the cheerful attitude in the Chinese calendar. On the other hand, the British pound failed to benefit from previously released positive UK statistics. It was considered one of the main reasons for the EUR/GBP pair’s gains. The lack of important data/events puts the EUR/GBP traders to the test.

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EUR/GBP price review

Currently, the EUR/GBP currency pair is trading at the 0.8352 level. The pair is consolidating in the range between 0.8342 and 0.8360. Despite the lack of essential data/events from the US for the day, the market’s trading mood improved and turned bullish. That happened mainly after China’s economy expanded at an annualized 4.0 percent from October to December 2021. In December, industrial production increased by 4.3 percent year on year, exceeding expectations. Domestic demand, on the other hand, has remained sluggish, with retail sales increasing by 1.7 percent less than expected in the year to December. Economic data in China may induce some easing from the PBoC shortly, further improving risk sentiment.

European Central Bank (ECB) amid a surge in Inflation

Last week, Fed Chairman Jerome Powell claimed during a hearing before the Senate Banking Committee that the US economy is ready to begin tightening monetary policy. According to other Fed members, interest rates will most likely be raised in March 2022. The Federal Reserve will meet on January 25-26 to make its next policy decision, while the Bank of England will meet on February 3 to make its decision.

Following remarks by Federal Reserve Bank of San Francisco President Mary Daly and New York Fed President John Williams on Friday, concerns about the Fed’s rate hike grew stronger. This, in turn, was seen as another key factor that helped the marker’s trading mood stay bid. The EUR/GB currency pair jumped due to the upbeat marker mood. On the other hand, officials from the European Central Bank (ECB) have recently become more vocal, admitting that rising inflation in the eurozone may endure longer, reigniting expectations of a rate hike by the central bank by the end of 2022.

PM Boris Johnson’s precarious position amid calls to resign

On the other hand, when it comes to economic growth prospects and investor morale in the region, the unabated spread of the coronavirus epidemic remains the only aspect to consider. Elsewhere, Prime Minister Boris Johnson is precarious, having received several calls to resign, including from within his own Conservative Party. Moreover, even if there is a change in leadership, we believe that the pound’s downside risks (which are presently being supported by strong Bank of England tightening forecasts) should be limited. This week’s flurry of significant data releases in the UK should provide some additional support to the currency.

According to MUFG Bank experts, the GBP has the opportunity to continue its recovery in the near term. According to them, the EUR/GBP pair is expected to hit new lows. “We believe the GBP’s recovery has more room to run in the short term, and we expect EUR/GBP to touch new lows.” “We do not expect political uncertainty surrounding Boris Johnson’s appointment as Prime Minister to have an impact on the GBP.” There is unlikely to be an instant shift in government policies if he is removed as leader following local elections in May. Moving on, the lack of significant data/events from the United States encourages investors to focus on China’s GDP and other key indicators for quick guidance. The most crucial considerations were virus updates and Fed rate hike fears.

EUR/GBP price forecast – Descending triangle pattern breakout 0.8358

The EUR/GBP is trading at 0.8358, having violated the descending triangle pattern on the 4-hour chart. The pattern extended resistance at 0.8350 along with support at 0.8335. The EUR/GBP has already violated the 0.8350 resistance and now it’s acting as a support. Further, on the higher side, the EUR/GBP may find the next resistance at the 0.8375 level.

In the 4-hour timeframe, the EUR/GBP pair’s significant resistance stays at the 0.8375 level. A spike in demand can slice through the 0.8375 levels to each of the 0.8420 or 0.8460 resistance levels.

Typically, the descending triangle patterns tend to break out on the bearish side, but this one has violated on the higher side. The RSI and Stoch RSI are supporting an uptrend in the EUR/GBP pair; therefore, a break above the 0.8375 level may help us capture buy trades in the EUR/GBP pair.

On the bearish side, immediate support stays at 0.8335 and a breakout of this level could send the EUR/GBP price towards the 0.8301 level. All the best, and stay tuned for more updates!