EUR/GBP Analysis: Price Reaches 6-month High

FXOpen

In the fall of 2023, bullish sentiment developed in the EUR/GBP market: since September 1, the rate has risen by more than 2%, price dynamics have formed an ascending channel (shown in blue). Moreover, on Friday, the price reached its highest in approximately 6 months.

Growth drivers, among other things, are news related to the policies of the Bank of England and the ECB aimed at combating high inflation, and what signals the economy gives in such conditions.

The latest news about UK GDP turned out to be better than expected (actual = +0.2% for the 3rd quarter, expectations = +0.1%), but the pound sterling did not show a positive reaction, for two reasons from a fundamental point of view:

→ Firstly, the details show that a significant contribution to GDP growth came from imports, a category that tends to be quite volatile between quarters. Other key areas — notably consumption and business investment — posted negative results in the quarter.

→ Secondly, GDP may decline due to the fact that the high rate policy pursued by the Bank of England should be more fully felt in the coming 2024.

If the pound didn't strengthen on Friday on the GDP news, could the bullish trend continue?

An important factor to note here from a technical analysis point of view is that the EUR/GBP price is near the key resistance of 0.8735. In the past, the level acted as support, holding its course in the first 4 months of the year. Now the level can act as resistance.

→ Divergence on the RSI indicator shows that the bullish momentum is weakening.
→ Resistance from the upper border of the ascending channel has not yet been broken.

These factors indicate that the EUR/GBP rate may be vulnerable to a pullback within the ascending channel.

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This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

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