EUR/GBP Price Forecast: Retreats below 0.8450 toward 200-day SMA
- EUR/GBP struggles to sustain uptrend, facing resistance near 0.8473.
- Pair tests 200-day SMA at 0.8422; could revisit year-to-date high if support holds.
- Potential downward move targets 100-day SMA at 0.8348 if support breaks.
The EUR/GBP failed to extend its gains for the second straight day, as stir resistance near 0.8473 was strong enough to be cleared by bulls. Therefore, the cross tumbles towards the 200-day Simple Moving Average (SMA) at 0.8422 and print losses of 0.03%.
EUR/GBP Price Forecast: Technical outlook
The pair resumed its uptrend on January 8, with the EUR/GBP posting gains of 2.29% in a seven-day span. Nevertheless, the EUR/GBP seems overextended, and it has consolidated above the 200-day SMA. If buyers hold prices above the latter, they could test the year-to-date (YTD) high at 0.8470.
On further strength, 0.8500 comes into play, followed by the August 24 peak at 0.8544. A breach of the latter will expose the August 14 daily high at 0.8592.
Conversely, if sellers drive EUR/GBP below the 200-day SMA, it will reach 0.8400. Further downside is clear, once the latter is surpassed, with bears targeting the 100-day SMA at 0.8348.
EUR/GBP Price Chart – Daily
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Author
Christian Borjon Valencia
FXStreet
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.
