EUR/GBP is testing key resistance after a strong upswing earlier this week.
Is the pair ready to extend its longer-term trend?
We’re detailing what we’re seeing on the 4-hour time frame:
EUR/GBP 4-hour Forex Chart by TradingView
In case you missed it, the Bank of England (BOE) just dropped its latest policy decisions. While the central bank kept its interest rates steady as expected, THREE members – including the Deputy Governor – voted to cut interest rates by 25 bps. Not only that, but the BOE’s meeting minutes also revealed concerns about economic growth despite sticky high price pressures.
The euro, on the other hand, is holding up relatively well given that mid-tier data printed from the region supported the European Central Bank’s (ECB) dovish biases.
But how high can EUR/GBP fly before the bears step back in?
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your homework on the euro and the British pound, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
EUR/GBP just bounced from its .8225 December support to hit the .8300 psychological level.
That’s only a few pips away from the R1 (.8352) Pivot Point line AND the top of a descending channel that’s been around since mid-September!
For now, EUR/GBP is trading closer to the 4-hour chart’s 200 SMA and an area that’s been of interest to bulls and bears since November.
We’re on the lookout for bullish candlesticks that could take EUR/GBP sustainably above .8300 as it opens up the possibility of a channel resistance retest and even a potential trip to the R1 Pivot Point.
But if EUR/GBP starts to turn lower closer to .8300, then you can also structure trading plans around a possible continuation of EUR/GBP’s longer-term downtrend. Watch for bearish candlesticks, which could draw in selling pressure and drag the pair back down to the .8225 December support.
Whichever scenario plays out, watch out for other top-tier catalysts that could impact overall market sentiment, and make sure you practice proper position sizing when taking any trades!