EUR/GBP struggles at 0.8600 ahead of the ECB monetary policy meeting
- Market mood is in risk-off mode, with investors moving towards safe-haven assets.
- ECB’s monetary policy meeting on Thursday awaited.
- EUR/GBP break below the 100-DMA could expose 2021 low at 0.8450.
EUR/GBP is trading steady during the New York session, currently at 0.8582, mainly unchanged on the day. Earlier during the European session, the pair reached a high at 0.8603, however it retraced gains on expectations of a possible ECB's stimulus program reduction.
The market sentiment is downbeat, with significant equity indices across Europe and the US falling. The CBOE Volatility Index (VIX), known as the “fear” index, is rising 1.27% and sits at 18.37, suggesting that investors remain reluctant to push stock indices towards new all-time highs.
On the Eurozone economic docket, French non-farm payrolls rose to 1.1% in Q2 versus 1.2% in Q1. On Thursday, the European Central Bank will hold its monetary policy meeting. The expectation is that the interest rate will be unchanged at 0%, but the topic of discussion will be the reduction of its bond purchasing program.
Regarding the UK economic docket, BoE’s Bailey is testifying before the parliament’s Treasury Committee. He commented about business indebtedness, insolvencies and that the repayment of COVID-19 loans may be easier than they thought. He made no comments in regards to monetary policy themes.
EUR/GBP Price Forecast: Technical outlook
The EUR/GBP has been trading range-bound between the 0.8450-0.8720 range over the last two months. The spot price is just above the 100-day moving average (DMA), which lies at 0.8579. A daily close above that level could pave the way for further gains. The first resistance level will be July’s 20 high at 0.8669. A break above the latter could expose April 16 high at 0.8720.
On the flip side, a failure at the 100-DMA, could send the pair tumbling towards 0.8450. The first obstacle on its way down would be the 50-DMA at 0.8545. A sustained break beneath that level, could send the EUR/GBP to the 2021 low at 0.8450.
The Relative Strength Index is at 56.39, flattish, suggesting consolidation is underway.
TECHNICAL LEVELS TO WATCH