EURGBP is in a consolidation pattern and is currently testing the bottom of a descending triangle formation visible on the 1-hour time frame. Price appears to be bouncing off support at the .7550 minor psychological mark and might be due for a test of resistance at the .7600 level.
This resistance area lines up with the moving averages, which might hold as dynamic inflection points. The 100 SMA is below the 200 SMA, indicating that the path of least resistance is to the downside.
Both RSI and stochastic are moving out of the oversold levels so buyers might take control of price action from here. Once these oscillators reach the overbought level, euro sellers could gain more energy to push the pair back down.
Event risks for this setup include the BOE statement, along with the Inflation Report and MPC meeting minutes. BOE Governor Carney previously expressed his downbeat bias, citing that weak inflation trends could lead the central bank to tighten much later than initially anticipated.
No actual policy changes are expected this week but any shift to a dovish bias by other policymakers could mean more losses for the pound. The currency enjoyed a rally yesterday when the UK manufacturing production report printed stronger than expected results.
As for the euro, the prospect of further ECB easing is still weighing on the shared currency. However, it also appears to be gaining support in a risk-off market environment.
By Kate Curtis from Trader’s Way