The euro currency has had a volatile trading week against the British pound after the pair rallied towards the 0.8680 level and then fell back towards its weekly opening price after the ECB interest rate decision caused the single currency to sell-off.
As widely anticipated, the ECB decided to leave the interest rates the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25% and -0.50%, while policymakers keep a clear dovish bias as they noted that the PEPP would continue to run significantly faster than at the beginning of the year.
The Government Council also delivered a new forward guidance, amid some decent internally, and noted that interest rates will remain at present or lower levels “until it sees inflation reaching two per cent well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realised progress in underlying inflation is sufficiently advanced”.
Currently the technical look bleak for the EURGBP, and other factors are also weighing on the pair such as sterling strength and a lack of a bid-tone surrounding the widely traded EURUSD pair. Often, when the EURUSD is gaining strength it can transfer across to other cross pairs, such as EURGBP.
The ActivTrader platform shows that sentiment has dipped from last week, however, a resounding bullish bias remains in force, which hints at more losses. With some 72 percent of traders still bullish it hints that more losses are coming.
It is also noteworthy that the EURGBP pair trades under its 200-day moving average, meaning the trend is still bearish, so selling rallies is the preferred strategy, as highlighted by this week’s reversal from the 0.8680 level.
EURGBP Short-term Technical Analysis
The four-hour time frame shows that the EURGBP pair is trapped inside a large triangle pattern, with the pattern located between the 0.8680 and 0.8520 level. According to the overall size of the pattern a coming move of around 160 points is coming.
Typically, when these types of patterns form it suggests that a big directional move is coming once the price move either side of the mention price pattern.
EURGBP Medium-term Technical Analysis
The daily time frame shows that the EURGBP pair remains vulnerable to further declines as the price is now testing back towards a key trendline around the 0.8550 support level.
Other negative technical factors weighing on the EURGBP pair include a long-term bearish head and shoulders pattern, and a broadening expanding wedge pattern. Both have a target of 0.8200.