EUR/GBP Price Forecast – Bearish Engulfing to Drive Sell Under 0.8380

• Germany’s trade surplus shrank to €11.5 billion in February from €11.6 billion in January.
• Germany projected that more sanctions against Russia would be imposed in the coming days. 
• EUR/GBP price forecast remains bearish as it’s heading south, trading at the 0.8360 level.

The EUR/GBP price forecast remains bearish under the 0.8360 level. During Tuesday’s European trading session, the EUR/GBP currency pair failed to stop its previous-session downward rally. It remained bearish around the 0.8370 level as disappointing Eurozone Sentix data kept weighing on the euro. Hence, it contributed to the EUR/GBP currency pair’s losses. Meanwhile, Germany’s trade surplus shrank to €11.5 billion in February from €11.6 billion in January. It fell short of market expectations of €9.6 billion, while the euro failed to find demand. 

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Bearish Bias in EUR/GBP Dominates

The EUR/GBP pair is down at the start of the week due to continued buying interest in the British pound. Governor Bailey is expected to speak on the same day. Therefore, the market participants will be looking for clues concerning the interest rate hike. Furthermore, no news from the geopolitical situation appears to be good news for the British pound.

At this time, the EUR/GBP currency pair is trading at 0.8390 and consolidating between 0.8390 and 0.8432. Despite weak European data and no new information on the geopolitical situation, the market’s trading tone has been positive since the day began.

Geopolitical Tensions – Russia & Ukraine in Play

On Tuesday, global equity markets got off to a shaky start amid ongoing threats of further penalties against Russia for its invasion of Ukraine. While a carefully watched portion of the US yield curve added to recession fears.

Ukraine accused Russian forces of war crimes following the killings of civilians near Kyiv, and Germany projected that more sanctions against Russia would be imposed in the coming days. 

In recent events, Ukraine has accused Russian soldiers of killing civilians in the town of Bucha. Boris Johnson, the British Prime Minister, stated that his government would increase sanctions and military and humanitarian aid to Ukraine. Furthermore, German Defense Minister Christine Lambrecht stated that the European Union could consider prohibiting Russian gas imports. This, combined with hawkish Governor Bailey’s expectations, should help the British pound.

EUR/GBP Fundamental Outlook

On the other hand, the shared currency remains bearish due to the poor Eurozone Sentix data. According to the latest Sentix research organization statistics released on Monday, investor mood in the Eurozone continued to deteriorate in 2022. The indicator fell to -18 in April from -7 in March, compared to the -9.2 projected. The index fell to its lowest level since July 2020, pointing to a second-quarter recession. The current conditions index fell to -5.5 from 7.8 in March in April. The expectation index dropped to -29.8 from 20.8, the lowest since December 2011.

Meanwhile, Governor Bailey is scheduled to speak on Monday, and traders will be looking for signs about interest rates. Even though the BoE moderated its tone following the last meeting, markets are heavily pricing in a 25 basis point rise at each of the next five sessions, bringing the base rate to 2% by the end of the year. 

There will be no high-impact data releases on the economic calendar on Monday so that market participants will stay focused on geopolitical developments. In the meantime, traders may be influenced by Bank of England Governor Andrew Bailey’s upcoming speech.

EUR/GBP Price Forecast – Daily Technical Levels

S3 0.83715
S2 0.83805
S1 0.83852
Pivot Point 0.83895
R1 0.83942
R2 0.83985
R3 0.84075

EUR/GBP Price Forecast – Upward Trendline Breakout 

The EUR/GBP price forecast remains bearish as it’s heading south, trading at the 0.8360 level. On the daily timeframe, the EUR/GBP is likely to violate the upward trendline at 0.8360. The closing of candles under this level has the potential to drive a downtrend in the EUR/GBP.

The weakness in the single currency, the euro, is likely to drive a downtrend in the EUR/GBP pair. Therefore, the pair is exposed to the next support level of 0.8296. A bearish breakout under the 0.8296 level could drive a further downtrend to the 0.8230 level.

The cross-currency pair has formed a bearish engulfing candlestick pattern that’s likely to extend the downtrend in the market. A surge in GBP demand can slice through the 0.8350 support level and drive further downtrends until 0.8296. If the market continues in a downtrend, the next EUR/GBP target is likely to be 0.8230.

On the upside, the EUR/GBP’s immediate resistance may prevail at the 0.84172 level, which is being extended by the recent high. A breakout of the 0.8417 level exposes the EUR/GBP price towards the next resistance level of the 0.8450 level. If the uptrend continues, the EUR/GBP price could rise as high as 0.8512.