The EURGBP rallied by +0.15% during the European session after a release of better-than-expected German GDP data. The QoQ Q3 GDP data rose to 0.3% against -0.2% surveyed, while Italian CPI data soared into a double-digit Zone at 11.9% against the 9.6% forecasted.
The ECB hiked rates by 75 bps delivering market expectations on Thursday as a measure to curb soaring inflation. The ECB Press Conference by President Lagarde failed to give investors enough reasons to be optimistic about the hike as she failed to articulate clear guidance for the December meeting.
Thus, the Euro bulls continue to face major headwinds as investors brace for another rate hike by the BoE next week Thursday. The BoE is expected to hike rates by 75 bps to 3.00% from a previous 2.25%. Investors will be paying close attention to the policy meeting along with PMI data releases.
The New Prime Minister continue to lift the hawkish sentiment on the Pound as market players see Sunak as someone who can restore stability of market conditions after recent volatility in the market. This afternoon, Investors will be closely watching the German CPI data YoY.
Daily Chart Analysis
The EURGBP bulls struggle to defend a 4-day streak of consecutive losses above the 0.8600 level. A break below 0.8600 could trigger further selling pressure towards the 0.8500 level, coinciding with the 200-day moving average. The pair is currently trapped inside a falling channel, which indicates a corrective pattern in the near term.
On the contrary, a break below the 0.8350 level could invalidate the possibility of a rally to the upside. Bears may gain control below the 0.8500 level and the next critical level to watch out for is the 0.8350 level. The MACD indicator reading suggests that bears are in control in the near term as Volume bars trade below the 0.000 benchmark level.
ActivTrader Sentiment tool suggests that bears have decreased to 51% from 73% last week as the pair bounces off a 0.8600 near-term support. The mixed fundamentals around the Euro continued to weigh EURGBP in the near term. A miss in Spanish GDP data along with French GDP is a major factor on the European economic docket weighing on the pair. An ECB rate hike delivered on Thursday could be inspiring the increasingly bullish sentiment.
However, the pair remains susceptible to further decline as traders shift their focus to the BoE policy meeting scheduled next week. The optimism surrounding the appointment of PM Rishi Sunak continues to weigh on the EURGBP in the near term.
The EURGBP is trading lower after getting rejected at the 0.8650 level, a previous support-turned-resistance. The near-term high coincides with a Bollinger Band Baseline (Orange) and the next key level is at 0.8570 and 0.8500 levels. Looking at the RSI indicator, the reading is trading below the 50.00 level suggesting that the pair is currently in a bearish zone and the market hasn’t found a bottom yet.
However, a break above the near-term resistance at the 0.8650 level could open the way for a rally toward the 0.8700 level coinciding with a 50-day moving average. Bulls may attempt a rally towards the 0.8780 level and 0.8850 level, an October 12 high.