European Currencies Test Key Support Levels

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European currencies have temporarily stabilised following a phase of downward correction, as markets await the release of key economic data. In the absence of new strong catalysts, the market has adopted a wait-and-see approach near critical support levels — 1.3400 for GBP/USD and 1.1600 for EUR/USD. Investors' attention is firmly focused on inflation figures, which may either support a resumption of recent bullish trends or serve as a trigger for a deeper correction.

Today, market participants are closely monitoring UK inflation data. In the coming trading sessions, investors are also expecting a batch of macroeconomic releases from the eurozone, including Italy’s CPI and trade balance figures — these could help define the short-term trajectory of the EUR/USD pair.

Amid uncertainty, investors continue to price in a potential correction in the US dollar. At the same time, the persistent divergence between the Federal Reserve and European regulators remains a key factor shaping the trend in major currency pairs.

GBP/USD

The GBP/USD pair tested the important support level near 1.3400 yesterday. Technical analysis of GBP/USD suggests a continuation of the downward correction within the formation of a Tower pattern. Should there be a sharp rebound from the 1.3300–1.3340 zone, the price may return to the 1.3470–1.3500 range.

Upcoming events that could shift the direction of GBP/USD:

  • Today at 09:00 (GMT+3): UK Consumer Price Index (CPI)
  • Today at 11:30 (GMT+3): UK House Price Index
  • Today at 15:30 (GMT+3): US Producer Price Index (PPI)

EUR/USD

The EUR/USD pair is currently holding above the 1.1500–1.1560 range. Its further movement will depend on macroeconomic data and the European Central Bank’s rhetoric. Technical analysis indicates the potential for a deeper downside correction as part of a Bearish Harami pattern. If buyers manage to defend the key support at 1.1600, the price could strengthen towards 1.1680–1.1700.

Upcoming events that could shift the direction of EUR/USD:

  • Today at 12:00 (GMT+3): Eurozone Trade Balance
  • Today at 17:00 (GMT+3): Speech by Michael S. Barr, Vice Chair for Supervision of the US Federal Reserve Board
  • Tomorrow at 12:00 (GMT+3): Eurozone Consumer Price Index (CPI)