- EURGBP surrenders its modest intraday gains and hangs near a two-week low.
- Friday’s breakdown below a two-week-old trading range favours bearish traders.
- Sustained strength beyond the 0.8800 mark is needed to negate the negative bias.
The EURGBP cross struggles to capitalize on its modest intraday uptick and meets with a fresh supply in the vicinity of the 0.8700 mark on Monday. The cross slides to the 0.8675-0.8670 area, or over a two-week low, during the first half of the European session and seems vulnerable to sliding further.
The British Pound's relative outperformance comes amid growing acceptance that the Bank of England will lift borrowing costs further to combat stubbornly high inflation. That said, a bleak outlook for the UK economy should keep a lid on any meaningful gains for the Sterling. Apart from this, talks for a more aggressive policy tightening by the European Central Bank lend support to the shared currency and help limit losses for the EURGBP cross.
From a technical perspective, Friday's sustained break below a two-week-old trading range support could be seen as a fresh trigger for bearish traders. Furthermore, oscillators on the daily chart have just started drifting in the negative territory and support prospects for further losses. Hence, some follow-through decline towards challenging the 100-day SMA support, currently near the 0.8610-0.8600 region, looks like a distinct possibility.
This is followed by the October monthly swing low, around the 0.8570 region, which if broken decisively will set the stage for a further near-term depreciating move. The EURGBP cross might then accelerate the downward trajectory towards testing the next relevant support near the 0.8500 psychological mark.
On the flip side, the 0.8700 round-figure mark now seems to have emerged as an immediate strong resistance. Any subsequent move-up could attract fresh sellers near the 0.8735-0.8740 region. This, in turn, should cap the EURGBP cross near the 0.8770-0.8775 supply zone. Some follow-through buying beyond the 0.8800 mark will negate the negative outlook and shift the near-term bias in favour of bullish traders, setting the stage for additional gains.
EURGBP daily chart
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Key levels to watch
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