EUR/GBP Price Forecast – Channel Breakout to Bring Buying above 0.8545
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- Halifax HPI for October surged to 0.9% against an estimated 0.7%, supporting the British Pound.
- BoE held interest rates steady and defied the projections that it would become the first major central bank to hike interest rates.
- EUR/GBP has violated the upward channel at 0.8545 level, supporting bullish bias in the pair.
The EUR/GBP price forecast remains bullish above the 0.8545 level, extended by a previously violated upward channel. The day before, the EUR/GBP was closed at 0.8567 after posting a high of 0.8596 and a low of 0.8547. The currency pair extended its gains on Friday to its highest since 1st October. However, it failed to remain there as it faced pressure during late trading hours and the prices lost most of their daily gains. However, the currency pair managed to end the day with minor gains.
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The Bank of England’s monetary policy decision
The currency pair EUR/GBP reached over one month’s highest level during early trading hours on Friday ahead of the Bank of England monetary policy decision. Investors were taking positions in the market with the expectation of a rate hike decision from the central bank.
However, after the bank released its monetary policy report, market participants were surprised. The bank held interest rates steady and defied the projections that it would become the first major central bank to hike interest rates following the coronavirus pandemic.
BoE’s Silvana Tenreyro remarks on policy
The statements released by BoE policymakers also played an essential role in the weighing of GBP. Silvana Tenreyro said on Friday that the BoE should take a cautious approach towards raising interest rates. The economy was below its pre-crisis size, and the labor market’s health was hard to interpret.
She even voted to keep the interest rate at 0.1% and was cautious about tighter policy. Thus, it ultimately weighed on GBP and pushed EUR/GBP higher during early trading hours.
Furthermore, Deputy Governor Dave Ramsden also explained that he voted to raise interest rates on Friday because he saw the labor market getting tighter. He wanted to ensure that once the transitory phase was over, inflation expectations would be displaced.
Economic events outlook
- On the data front, at 12:00 GMT, the German Industrial Production in September fell by -1.1% against the projected 1.1%. It weighed on the euro, which capitulated further gains in the EUR/GBP currency pair.
- At 12:45 GMT, French industrial production also decreased to-1.3% against the predicted 0.0%.
- The French Prelim Private Payrolls for the quarter also dropped to 0.5% from an estimated 0.6%.
- At 14:00 GMT, Italian retail sales increased to 0.8% versus the expected 0.2%, bolstering the single currency euro. It also added to the EUR/GBP currency pair’s gains.
- The whole bloc fell to-0.3% against the predicted 0.2% and weighed on the euro. That also limited the gains in the EUR/GBP pair.
- On the British front, at 12:00 GMT, the Halifax HPI for October surged to 0.9% against an estimated 0.7%. Hence, it supported the British Pound, which capped gains in the EUR/GBP pair.
Covid-19 fears continue to play
On the European front, daily coronavirus infections hit an all-time high in Germany. The World Health Organization warned that another 500,000 people could die across Europe, with cases again on the rise. The upcoming holiday season, the cold weather, and the eased restrictions on travel and tourism added to the increased number of cases across Europe.
Eastern Europe was seeing a massive increase in the number of cases. That’s because the region was lacking vaccination rates as compared to other regions across the bloc. Hence, it weighed on the single currency euro and dragged down the gains of the EUR/GBP pair.
EUR/GBP price forecast – Daily technical levels
Support Resistance
0.8565 0.8582
0.8556 0.8590
0.8548 0.8599
Pivot Point: 0.8573
EUR/GBP price forecast – 38.2% Fibonacci retracement underpins at $0.8543
On Monday, the cross-currency pair EUR/GBP is trading with a solid bullish bias at 0.8575. In the 2 hour timeframe, the EUR/GBP has violated the upward channel at 0.8545 level.
For now, the same trading level is operating as a support for the EUR/GBP currency pair. As you can see on the 2-hour timeframe, the overbought EUR/GBP has already completed a 38.2% Fibonacci correction level at the 0.8545 level.
On the bullish side, a breakout of the 0.8594 level can trigger a bullish trend until the next resistance level of the 0.8624 level. Whereas, above this, the 0.8655 level is likely to work as the next significant resistance.
On the bearish side, the EUR/GBP pair may gain support at the 0.8545 level. A break below the 0.8545 level, on the other hand, can extend the selling trend to the 50% and 61.8% levels. These Fibonacci levels will support the EUR/GBP pair at 0.8528 and 0.8512 levels.
The RSI and stochastic RSI exhibit a mixed bias. For instance, the RSI is above 50, supporting a bullish trend. The Stochastic RSI is currently holding below 50 at 22.95, indicating a selling trend in the EUR/GBP pair.
Thus, it’s really important for the EUR/GBP to violate the 0.8594 – 0.8545 trading range before showing further trends in the market. Consider staying bullish over the 0.8545 level today. Stay tuned for more updates!
