- The euro seems unable to bounce from the 0.8500 support area.
- Concerns about rising inflation are weighing on the EUR.
- A break of 0.8500 would expose a year-to-date low at 0.8450.
EUR has rallied against sterling on Wednesday after losing nearly 1.5% in a four-day pullback from last week’s high at 0.8655. However, EUR/GBP recovery lacks follow-through and remains dangerously close to the 0.8500 support area.
Euro suffers from concerns about the euro zone
Investor concerns about rising energy prices and their impact on the eurozone’s growth outlook have weighed on the euro, which has been declining against its main rivals. In contrast, the pound has gained ground, supported by market expectations that the Bank of England will be one of the first major central banks to raise interest rates in the wake of the COVID-19 crisis.
Macroeconomic data has not been particularly favorable for the euro either. The result was a 7.7% decline in German factory orders in August, worse than the market’s expectation of a milder 2.1% drop, and a 0.3% decline in eurozone retail consumption, a far cry from the market’s expectation of 0.8% growth.
EUR/GBP: Testing important support at 0.8500
The pair is now just a handful of pips above 0.8500 (lows of September 16, October 5). Below here, the 19-month low at 0.8550 could be exposed and cause a double top formation with a target well below 0.8300.
To relieve downside pressure and attempt a retest of 0.8610 (Sep 8 and 23), the pair should regain the 50-day and 100-day simple moving averages (SMA) above 0.8560 (highs of May 25, July 20 and Sep 29).
Today’s Last Price 0.8504
Daily Rate -0.0005
Daily Rate % -0.06
Today’s Daily Open 0.8509
20 Daily SMA 0.8562
50 Daily SMA 0.8548
100 Daily SMA 0.8566
200 Daily SMA 0.8641