Buying the Retreat in EUR/GBP at MAs
EUR/GBP has been bullish since early September, starting the bullish momentum above 0.8520 and reaching the 0.8705 level on Friday, which it retested again early this week after a retreat lower to the 20 SMA (gray) on the H4 chart. We bought that dip and the price returned higher, resuming the bullish momentum after dipping below the 20 SMA for a short period.
We did the same yesterday and opened another buy EUR/GBP signal at the 50 SMA (yellow). Although last week the Euro (EUR) enjoyed its best trading week versus the Pound Sterling (GBP) since early February while this week the new high was just a pip above last week’s high.
But, the GBP has turned bearish after the Bank of England unexpectedly maintained interest rates constant, with GBP/USD approaching below 1.21 earlier today. The picture has moved significantly in recent weeks, and investors are concerned about the UK economy’s future growth prospects. BOE governor Bailey indicated that if economic growth continues to deteriorate which is happening, no more rises will be required.
We heard yesterday from ECB’s Madis Müller that as things stand, no additional rate rises are expected, which impacted on the Euro. However, this is in line with market expectations at the time. The issue now is when the ECB will decrease interest rates. They’re attempting to promote a higher-for-longer game, but markets anticipate the first rate cut to be arriving around July of next year.
The unexpected BOE pause sent the GBP plunging to the lowest levels in two months versus the Euro and against most major currencies for that matter. The EUR/GBP H4 chart indicates significant resistance from both the psychological 0.8700 level and the 200-day SMA. If the bullish trend continues, upside goals include 0.8738 and 0.8790. On the downside, 0.8625 serves as a first support level. The 0.8545 level provides significant support.
EUR/GBP Live Chart
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