EUR/GBP pair drops to a new seven-day low of 0.8546, influenced by market expectations of a BoE rate hike and ECB’s unchanged stance.
Technical analysis shows the pair struggling to break the 50-day SMA at 0.8582, maintaining a downtrend with a year-to-date low of 0.8492 in sight.
Despite the downtrend, a falling wedge pattern suggests an upside potential, with key resistance levels at 0.8572 and 0.8600 to watch.
The Euro (EUR) loses ground against the Pound Sterling (GBP) amid a risk-on impulse, as well as expectations for interest rates staying unchanged by the European Central Bank (ECB). At the same time, the Bank of England (BoE) is seen by market analysts as the only one to raise rates by 25 bps in September. That, alongside technical resistance, dragged the EUR/GBP to a new seven-day low, as the pair trades at 0.8546 after hitting a high of 0.8559.
EUR/GBP Price Analysis: Technical outlook
The daily chart portrays the pair tested the 50-day Simple Moving Average (SMA) at 0.8582, but buyers failed to pierce it on the upside, so the cross extended its losses toward current exchange rates. Due to the pair registering a successive series of lower highs and lows, the downtrend is intact, and if the pair breaches the year-to-date (YTD) low of 0.8492, August 24, 2022, would be tested at 0.8408.
On an intraday bias, the EUR/GBP is trending down but is forming a falling wedge, a bullish chart pattern, that could pave the way for further upside. If the cross breaks to the upside, the first resistance would be the 200-hour SMA (HSMA) at 0.8572, followed by the psychological 0.8600 figure and last week’s high of 0.8610.
If the pair manages to remain within the chart pattern, further downside is seen at the bottom of the falling wedge at around 0.8530/20, which, if broken, the EUR/GBP could plunge towards the YTD low of 0.8492.
EUR/GBP Price Action – Hourly chart