EUR/GBP Violates Symmetrical Triangle – What Could Drive Uptrend?
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- Bank of England has recently sounded more dovish about the potential of long-term tightening.
- EUR/GBP is trading at 0.8403 level, having violated the symmetrical triangle pattern that was extending resistance at 0.8380 level.
- A break below this could expose the EUR/GBP price towards the 0.8300 level.
The EUR/GBP currency pair managed to extend its previous-day upward rally and hit a two-week high above the 0.8400 level. However, the reason for its upward trend could be linked to a strengthening risk appetite after Russia suggested that it was ready to negotiate with Ukraine. The Kremlin indicated it was ready to send a delegation to Minsk, rekindling some tiny hopes that a diplomatic solution could bring the conflict to a conclusion. This, in turn, was considered as one of the major factors driving the euro higher and contributing to the EUR/GBP pair’s gains.
BoE and the ECB Policy Decisions to Impact EUR/GBP
Traders are wondering how recent developments will affect the prospect of policy divergence between the BoE and the ECB. The Bank of England has recently sounded more dovish about the potential of long-term tightening. That’s despite continuing to raise interest rates back to pre-pandemic levels. The uncertainty caused by the Ukraine conflict is expected to slow GDP growth this year. Thus it may further dampen the prospect of long-term tightening. This has a bearish influence on the pound sterling, which helps the EUR/GBP pair. At this time, the EUR/GBP currency pair is trading at 0.8404 and consolidating in the range between 0.8345 and 0.8407.
Russia and Ukraine War Sentiments in Play
Despite escalating violence in Ukraine, US share markets rallied on Friday. Hence, it closed the week at all-time highs. The S&P 500 index, hit 4100 in premarket trade and was trading in the 4370 range on Friday. It’s up more than 6.0 percent from earlier weekly lows and up 1.9 percent on the day. Traders and market observers have linked the recovery to several variables.
To begin with, following the initial shock of Russia’s surprise invasion of Ukraine on Thursday. It became evident to many that the EU and US would not impose sanctions on Russian energy exports, fearing economic harm. As long as that is the case, some of the stagflationary risks linked to the Russo-Ukraine war will be mitigated. Others have pointed out that large geopolitical crises in the past haven’t had a long-term influence on US market prices, implying that there’s been plenty of demand to purchasing the dip.
Meanwhile, the Kremlin announced that it was prepared to send a delegation to Minsk. Rekindling some modest hopes that a diplomatic solution could bring the conflict to an end. This was seen as the major key factor that helped the EUR/GBP pair stay bid.
The economic event outlook
The reason for the market’s risk-on mood could also be tied to the upbeat US data that was released on Friday. Despite the high incidence of Omicron in January, personal income and spending indicators both exceeded estimates. Durable goods orders also saw robust growth during the same month, indicating economic resilience.
The rise is likely being fueled by economic confidence. Whereas, the fact that the latest Core PCE inflation report (also for January) was roughly in line with forecasts.
In public statements on Friday, ECB Chief Economist Philip Lane described different scenarios. All of this was viewed as lowering Eurozone GDP and pushing up inflation. One expert said that “it is likely that the ECB will raise its inflation projection,”. He further added that “we may still see an expedited tapering as long as the conflict remains within Ukraine.”
Looking ahead, the developments surrounding the Russia-Ukraine saga will be closely watched by EUR/GBP traders in the upcoming days.
EUR/GBP price forecast –Daily Technical Levels
Support Resistance
0.83601 0.84209
0.83221 0.84437
0.82613 0.85045
Pivot Point: 0.83829
EUR/GBP price forecast – Symmetrical Triangle Breakout
The EUR/GBP is trading at 0.8403 level, having violated the symmetrical triangle pattern that was extending resistance at 0.8380 level. A breakout of 0.8380 level exposes the EUR/GBP price towards the next resistance level of 0.8403 level. Continuation of the uptrend can expose the EUR/GBP price further higher until 0.8440 and 0.8450 levels.
Typically, the breakout of a symmetrical triangle pattern can drive price action on either side. Therefore, an upward breakout of the 0.8380 level exposes the price towards the 0.8450 and 0.8480 levels. Alongside, the RSI and MACD are in support of a buying trend.
On the 4-hour chart, the EUR/GBP pair is gaining support at the 0.8340 level. This level is being extended by a 50-day exponential moving average. That’s also supporting an uptrend in EUR/GBP. The EUR/GBP has formed a “three white soldiers” pattern, which suggests a strong bullish bias among investors. Thus, we should look for a buy trade over the 0.8350 level in the coming week.
Alternatively, the EUR/GBP’s major support prevails at the 0.8345 level. A break below this could expose the EUR/GBP price towards the 0.8300 level. Thus, let’s keep an eye on the 0.8350 level to take a buy trade and vice versa. All the best, and stay tuned for more updates!
