EUR/GBP Attempts to Turn Bullish After Consolidation
EUR/GBP turned bearish by the end of November, after pushing higher from August until the middle of last month, gaining around 250 pips, with moving averages functioning as support. However, the trend shifted late last month and the decline was pretty steep, as this pair gave back most of the gains, although we’re seeing a bullish attempt from buyers now, after consolidation since the beginning of December.
During the uptrend, moving averages were acting as support on the H4 chart, allowing us to purchase this pair when the market retreated lower. Then when the trend turned bearish MAs started functioning as resistance at the topside, where we have been selling this pair. The 20 SMA (gray) has been the ultimate resistance which showed that the pace of the decline has been strong, since the beginning of December the 50 SMA (yellow) has taken over. Although the downturn halted and buyers pushed the price above the 50 SMA yesterday, in an attempt to turn the tide around, however it’s too early to tell.
Regarding fundamentals, both the Eurozone and the UK economy are at a similar situation. The Eurozone economy has worsened significantly this year, and the ECB has become more dovish, as we heard comments from ECB members sounding satisfied with the way inflation has been slowing.
However, a similar picture is emerging in the United Kingdom, with economic data indicating deeper economic weakness despite a slight improvement in the services activity in November, and the Bank of England softening the tone as well. Both economies remain close to recession, therefore both currencies have been among the weakest in recent weeks.
Tomorrow we have the European Central Bank and the Bank of England policy decisions and both are expected to keep interest rates steady. However, analysts expect the ECB to turn even more dovish in the future which should weigh on the Euro more than on the GBP, thus keeping EUR/GBP bearish.
EUR/GBP Live Chart
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