- Pound managed to stabilize, helping EUR/GBP move off highs.
- Despite retreat pair still headed for the highest close since mid-March.
The EUR/GBP surged earlier today, rising to 0.8868, the highest level in three months. The pair then pulled back, falling back under the 0.8850 zone. As of writing it was trading at 0.8840, up 30 pips for the day, headed toward the highest daily close since mid-March.
A week ago, EUR/GBP tested a key support near 0.8700 following the Bank of England meeting and the 6-3 vote to keep rates unchanged. Afterward, the pound lost momentum and weakened. On Wednesday, Ian McCafferty, said that the BoE ‘should not dally’ in raising rates but his words had no lasting impact as he will be replaced in September.
“Yesterday comments from his replacement Haskel suggest a more dovish leaning and this has sapped some support from the pound. The break by EUR/GBP above the 200 day sma resistance today, saw a brief acceleration in the move in the currency pair. We retain a target of EUR/GBP 0.89 but given our bullish USD outlook we see greater downside potential in cable”, wrote analyst at Rabobank. Today, BoE Haldane said that he does not expect a faster pace of interest rate that the one envisaged at the time of the May Inflation Report.
Levels to watch
The tone around the pound and EUR/GBP changed significantly in a week. If the euro manages to remain above 0.8850 it could open the doors to further gains and a potential test of the next resistance at 0.8860 and 0.8890.
On the flip side, if the pair drops back below 0.8830 it would suggests that the consolidation range still prevails, pointing to further losses. Supports might be seen at 0.8800 and 0.8770.
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