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The EURGBP was down -0.10% early Friday morning despite thin trading conditions following mixed European economic data. The Spanish GDP YoY data fell to 4.4% vs 7.6% previous, although it was better than the expected 3.8% for Q3. The QoQ GDP fell to 0.1% vs 0.2% anticipated. However, Italian Consumer Confidence rose to 102.5 from the 98.5 anticipated.
The GBPUSD rose by +0.28% as bulls recover at the close of the week ahead of the Christmas holiday. The weakness in the US boosted the Pound as traders shift their focus to the US economic data. There will be a release of US Core Durable Goods Orders, Housing data and Consumer spending later in the New York session.
However, an extended rally is possible if EURGBP bulls hold gains above the 0.8800 level. The Pound has limited gains as the economy shrank more than expected in the 3rd quarter. The UK GDP YoY fell to 1.9% against the 2.4% forecasted while QoQ Q3 data came in at -0.3% against -0.2% surveyed. Recession fears remain a major tailwind for EURGBP buyers in the near term.
Weekly Chart Analysis
The EURGBP sustained modest gains for three consecutive weeks from the 0.8570 support level and upside gains are capped by the 0.8900 psychological barriers. The bullish close could attract short-term buyers towards the 0.8900 level and a break above that level could reinforce the bullish outlook towards the 0.92800 level coinciding with a 21-months high. The MACD indicator volume bars are trading at the 0.00 benchmark level and a possible break above that level could see an entry of fresh buyers into the market.
However, if EURGBP slips below 0.8700 coinciding with the 200-moving Average and Bollinger Band Baseline, bears could gain momentum to violate the 0.8570 support level. The next key support levels to watch out for are the 0.83500 and 0.8200 levels.
The ActivTrader Sentiment tool suggests that 88% of Retail Traders have a bearish outlook on the EURGBP. Short-term Traders could be seeking a market top as the pair is capped by the 0.8820 level. The pair could take a short-term retracement as Euro gets hammered by a drop in Spanish GDP data, although it was better than expected.
However, the shrink in the UK economy remains a major tailwind for EURGBP bulls. The slump in UK GDP numbers gave way to recession fears as investors shift focus to the start of 2023. There is also limited impact from the UK economic docket as markets close for the Christmas holiday.
Daily Chart Analysis
The EURGBP paused a 2-day rally after claiming the 0.8800 level, coinciding with a 2-months resistance level. A failure to break above that level could see a retracement towards the 0.8700 level, near-term support. The Williams Alligator tool suggests that the pair is bullish biased as the price trades above the moving averages, dynamic support and resistance. A break above the 0.8820 level could extend the rally towards the 0.9000 psychological level.
However, a break below the 0.8700 near-term support could trigger bearish weakness towards the 0.85700 level. A failure to hold above that level could invalidate the current bullish outlook and the next key target is at the 0.8350 level. The RSI indicator is currently trading near the 70.00 level which coincides with an overbought region and the pair is susceptible to sharp retracements in the near term.
