EUR/GBP has slid to its weakest level in a year, as the two currencies continue to follow increasingly divergent paths. The ECB's June hike—its first since 2023—was meant to signal renewed hawkishness, but the very next inflation print undercut that narrative: price growth cooled from 3.2% to 2.8%, enough for markets to now assign an 88% probability that policymakers will simply hold steady at their July 23 meeting. In other words, the euro's tightening story may already be running out of road.

The pound, by contrast, is benefiting from a rare double tailwind. Domestically, much of the political uncertainty that had weighed on sterling appears to be fading as investors look past recent leadership turmoil, while falling mortgage rates and a sharp drop in diesel prices are easing cost-of-living pressure at home. On the policy side, traders are increasingly convinced the Bank of England still has room to hike before year-end, with odds now sitting near 76%—a stark contrast to the ECB's apparent pause.

Put simply, the euro's hawkish window looks to be closing, while the pound is gaining traction on two fronts at once. That divergence is exactly what's driving EUR/GBP toward these lows—and it's worth asking how much further it can run.

EUR/GBP Technical Analysis

As the H4 chart shows, prices spent months trading lower from the April highs. In mid-June,  the pair broke above the descending trendline. Since then, that same trendline has flipped into support, and price now appears to be testing it again from above.

Bullish Scenario

Adding weight to this reading is a bullish RSI divergence: while price printed a fresh low in early July, the RSI itself formed a higher low, hinting at fading downside momentum beneath the surface. If buyers step in and defend the reclaimed trendline along with the 0.8500 psychological zone, this divergence could gain real technical credibility. It would open the door for a corrective bounce with scope to extend meaningfully higher towards the former support, now resistance, near the 0.8600 zone. There, price could face an important test. A break above this level could open the way towards the 0.8680–0.8700 zone, a historic equilibrium area for the pair.

Bearish Scenario

However, if sellers manage to push back through this trendline, decisively flipping it back into resistance, the bullish divergence would quickly lose much of its relevance and credibility. In that case, the focus would shift immediately to the psychological 0.8500 support. A confirmed break below it could signal that the broader downtrend remains firmly intact, likely triggering a fresh leg lower and exposing the pair to new multi-month lows last seen over a year ago.

With price balanced right on this reclaimed trendline, and momentum quietly diverging from price, EUR/GBP's next move could prove decisive either way.

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