EUR/GBP: All looks good for a budding recovery – DBS Bank

EUR/GBP has broken over the resistance line drawn from April highs and is comfortably above the 40-week moving average of 0.8442, signaling a budding recovery. Hawkish European Central Bank (ECB) rhetoric also adds fuel to the upmove, Benjamin Wong, Strategist at DBS Bank reports.

ECB's hawkish rhetoric paves the way for recovery

“EUR/GBP is now comfortably above the 40-week moving average at 0.8442 and trying to sustain gains over a minor intermediate dropped-down resistance line from 0.8719, the late April highs. The moving average convergence divergence (MACD) signal is grinding out a nascent buy signal, so all looks good for a budding recovery.”

“ECB hawkish rhetoric is driving the cart. The next ECB policy meeting scheduled for 9 June is watching out for signs of a July policy lift-off. Given that inflation has nudged to 8.1% in May for the eurozone, Klass Knot (a noted hawk, President of the Dutch central bank) has remarked a 50 bps rate hike is not off the table.” 

“EUR/GBP has edged higher and paved cloud support at 0.8358 on the daily Ichimoku charts. Nonetheless, the cross still has hurdles to clear. 0.8618 the mid-May spike high and 0.8659 are intermittent resistance levels to break.”