EUR/GBP surges after Eurozone GDP data, bears take a breather

On Tuesday's session, the EUR/GBP was witnessed at 0.8565, exhibiting a 0.50% rally. The daily chart reflects a neutral to bullish outlook with bears taking a breather after driving prices to multi-month lows. All eyes are on the Bank of England (BoE) decision on Thursday as monetary policy divergences with the European Central Bank (ECB) are the one who pushed the cross lower in the last sessions.

In Q4 2023, the Eurozone economy measured by the Gross Domestic Product (GDP) stagnated but slightly outperformed market expectations which seemed to have given the EUR a lift. As stated by Eurostat, investment spending slowed, largely due to surged interest rates leading to reduced loan demand. On Wednesday, inflation figures from January are due and may generate further volatility on the pair as it might affect the expectations on the next ECB decisions.

EUR/GBP levels to watch

The daily chart, suggests that the bears ran out of steam. The Relative Strength Index (RSI) shows a positive incline, albeit still within the negative territory, hinting at a decrease in downward momentum. This, coupled with the Moving Average Convergence Divergence (MACD) displaying a reduction of red bars, further strengthens the view that the selling pressure may be lessening. However, the pair's positioning below the 20, 100, and 200-day Simple Moving Averages (SMAs), relays the message that in the grand scheme, bearish momentum remains the dominant force. The recent push to multi-month lows by the bears signifies they are still commanding the market, and that they are currently taking a respite.

Inspecting the shorter four-hour chart, there's a noticeable uptick in buying force. This is evident by the RSI nearing the overbought zone, signifying an increased bullish momentum. The MACD also dovetails with this sentiment as the number of red bars is tapering, suggesting a subsiding in selling forces.

EUR/GBP daily chart