EUR/GBP remains hovering above 0.8500 support area

The euro has ticked up against the British pound on Wednesday after having lost nearly 1.5% in a four-day reversal from last week's high at 0.8655. The pair’s recovery, however, is lacking follow-through and it remains dangerously close to the 0.8500 support area.

Euro suffers on concerns about the Eurozone

Investors’ concerns about the surging energy prices and their impact on the Eurozone’s growth prospects have been weighing on the euro, which has been retreating against its main rivals this week. The pound, on the contrary, has remained somewhat firmer, supported by market expectations that the Bank of England will be one of the first major central banks to start hiking interest rates. after the COVID-19 crisis.

Macroeconomic data has not been particularly supportive of the euro either. German Factory orders declined 7.7% in August, beyond the milder 2.1% drop anticipated by the experts while Eurozone retail consumption increased 0.3%, well below the 0.8% increment expected.

EUR/GBP: testing an important support at 0.8500

The pair is now only a handful of pips above 0.8500 (September 16, October 5 lows). Below here, 19-month lows ar 0.8550 would be exposed and might activate a double top formation with its target at levels well below 0.8300.

On the upside, the pair should regain the 50 and 100-day SMA’s above 0.8560 to ease negative pressure to attempt a retest of 0.8610 (September 8 and 23) on its way to 0.8655/70 (May 25, July 20, and September 29 highs).

Technical levels to watch