The Bank of England and the European Central Bank both hiked rates to 4% and 2.5% (Deposit Rate) as expected. In fact, there should have been little upheaval in the single currencies with Governor Baileys and President Lagarde’s speech and Q&A unable to upset the markets.
We witnessed some choppy intraday trading in EURGBP after the cross posted a 5-month high of 0.8955, a low of 1.1167 for GBPEUR.
From a technical standpoint, using Cypher formation studies, EURGBP is highlighting that a top could be in place.
Let us look at the charts with an emphasis on the single currency baskets first.
EURO basket daily
The Euro completed a bearish cypher formation known as a Butterfly pattern back on the 12 th of January 2023. We have seen sideways movement since that point, with the markets consolidating before data releases.
EURO basket 4-hour
Breaking down into shorter time frames, the scope for the upside is limited.
GBP basket 8-hour
The single currency Sterling chart highlights a completed Butterfly formation with strong buying witnessed this morning.
GBP basket Daily
The upside potential is ample before we see any relevant resistance barriers.
Correlation
Using correlation, we have a downside bias in the Euro, and an upside bias in GBP. Bearish (negative) on EURGBP. Bullish (positive) on GBPEUR
EUR/GBP outlook
EUR/GBP 8-hour
We have competed a bearish (negative) Butterfly formation at 0.8955.
To the downside we have support at:
-
0.8828 (resistance in GBPEUR at 1.1327).
-
0.8765-50 (resistance in GBPEUR at 1.1400).
-
0.8620 (resistance in GBPEUR at 1.1600).
Using the Elliott Wave theory (5-wave pattern) this looks likely to be pauses in the selloff.
Big Picture Analysis
EUR/GBP daily
Although this offers an immediate downside bias for EURGBP, and we look for a sustained move down to 0.8620 support, this could be a corrective cycle before buyers return and push the pair towards 0.9200 (GBPCHF 1.0869) before completing a bearish (negative) Bat formation.
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