EUR/GBP hangs near multi-week low, bears await sustained break below 0.8500 mark

A combination of factors dragged EUR/GBP to a nearly four-week low on Thursday.
Recession fears continued weighing on the shared currency and acted as a headwind.
Reduced political uncertainty lifted sterling and further contributed to the selling bias.

Haresh Menghani FXStreet

The EUR/GBP cross prolonged its recent pullback from the 0.8680 region and continued losing ground for the fourth successive day on Wednesday. The downward trajectory dragged spot prices to a nearly four-week low, with bears now awaiting sustained weakness below the 0.8500 psychological mark.

The shared currency continued with its relative underperformance amid the ongoing energy crisis in Europe, which could drag the region's economy faster and deeper into recession. The market worries were further fueled by European Commission chief Ursula von der Leyen's warning on Wednesday, saying that the EU needs to make emergency plans to prepare for a complete cut-off of Russian gas.

On the other hand, the British pound drew some support from modest US dollar pullback from a two-decade high and the prospect of reduced political uncertainty. In the latest development, UK Prime Minister Boris Johnson announced his resignation, marking the end of the recent political drama in the country. Johnson's departure, however, was almost a certainty and largely priced in by markets.

Furthermore, investors remain worried that the UK government's controversial Northern Ireland Protocol Bill could trigger a trade war with the European Union. Apart from this, expectations that the Bank of England would adopt a gradual approach towards raising interest rates amid growing recession fears acted as a headwind for sterling. This, in turn, should limit losses for the EUR/GBP cross.

Hence, any subsequent downfall is more likely to find decent support near a technically significant 200-day SMA, currently around the 0.8445 region, which should act as a strong base for the EUR/GBP cross. That said, a convincing break below would be seen as a fresh trigger for bearish traders and set the stage for a further near-term depreciating move.

Technical levels to watch

EUR/GBP

Overview
Today last price	0.851
Today Daily Change	-0.0027
Today Daily Change %	-0.32
Today daily open	0.8537

Trends
Daily SMA20	0.859
Daily SMA50	0.8537
Daily SMA100	0.8447
Daily SMA200	0.8446

Levels
Previous Daily High	0.8603
Previous Daily Low	0.8533
Previous Weekly High	0.8679
Previous Weekly Low	0.8551
Previous Monthly High	0.8721
Previous Monthly Low	0.8486
Daily Fibonacci 38.2%	0.8559
Daily Fibonacci 61.8%	0.8576
Daily Pivot Point S1	0.8512
Daily Pivot Point S2	0.8487
Daily Pivot Point S3	0.8442
Daily Pivot Point R1	0.8582
Daily Pivot Point R2	0.8628
Daily Pivot Point R3	0.8653

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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