The sharp rise in the euro for the past two weeks has been fueled by several factors, including the dissipation of political risk after the euro-supporting French elections in early May, general improvements in eurozone economic data, and rising inflation readings within the euro area. In turn, these conditions have raised speculation that the European Central Bank may begin to tighten monetary policy sooner rather than later, which boosts the outlook for the shared currency.
The euro’s surge within the past two weeks has been most pronounced on EUR/USD, as the US dollar has experienced a sharp pullback within the same period of time. But EUR/GBP has also seen a steep climb, as the British pound has recently been lagging amid uncertainties surrounding the UK snap elections set for early June, as well as a long road ahead of difficult Brexit negotiations for the UK.
In the next two days, a couple of events could further impact EUR/GBP price action, including Wednesday’s speech by ECB President Mario Draghi in Spain and Thursday’s second UK GDP estimate for the first quarter.
On Tuesday, EUR/GBP’s two-week rise encountered some key resistance around the intersection of two major trend lines – 1) a descending resistance trend line extending from October’s 0.9100-area highs, and 2) the underside of a longer-term rising trend line extending all the way back from late 2015. The intersection of these lines, currently around the 0.8650 price level, is tentatively serving as technical resistance to further gains for the currency pair. If EUR/GBP manages to hold below this trend line intersection, the currency pair could see some of its recent gains pared back towards the 0.8500 and 0.8400 support levels.
Investopedia does not provide individual or customized legal, tax, or investment services. Since each individual’s situation is unique, a qualified professional should be consulted before making financial decisions. Investopedia makes no guarantees as to the accuracy, thoroughness or quality of the information, which is provided on an “AS-IS” and “AS AVAILABLE” basis at User’s sole risk. The information and investment strategies provided by Investopedia are neither comprehensive nor appropriate for every individual. Some of the information is relevant only in Canada or the U.S., and may not be relevant to or compliant with the laws, regulations or other legal requirements of other countries. It is your responsibility to determine whether, how and to what extent your intended use of the information and services will be technically and legally possible in the areas of the world where you intend to use them. You are advised to verify any information before using it for any personal, financial or business purpose. In addition, the opinions and views expressed in any article on Investopedia are solely those of the author(s) of the article and do not reflect the opinions of Investopedia or its management. The website content and services may be modified at any time by us, without advance notice or reason, and Investopedia shall have no obligation to notify you of any corrections or changes to any website content. All content provided by Investopedia, including articles, charts, data, artwork, logos, graphics, photographs, animation, videos, website design and architecture, audio clips and environments (collectively the "Content"), is the property of Investopedia and is protected by national and international copyright laws. Apart from the licensed rights, website users may not reproduce, publish, translate, merge, sell, distribute, modify or create a derivative work of, the Content, or incorporate the Content in any database or other website, in whole or in part. Copyright © 2010 Investopedia US, a division of ValueClick, Inc. All Rights Reserved
Recommended Content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.