- EUR/GBP gained some traction on Friday amid a modest bounce in the shared currency.
- Fears of nationwide lockdown in the UK undermined the GBP and remained supportive.
- The lack of follow-through buying warrants caution for bulls ahead of the Eurozone data.
The EUR/GBP cross quickly retreated around 20-25 pips during the early European session, albeit has still managed to hold modest daily gains, around the 0.9030 region.
Following the previous day’s good two-way intraday price swings, the cross managed to regain some positive traction on the last trading day of the week amid a modest pickup in the shared currency. As investors looked past Thursday’s dovish ECB event, the euro found some support from a subdued USD dollar demand.
It is worth recalling that the ECB explicitly mentioned that it is ready to recalibrate its instruments and signalled further monetary easing by the end of the year. The sense of urgency for more easing has been exacerbated by the imposition of fresh COVID-19 restrictions in the Eurozone’s two largest economies.
Market participants now look forward to the preliminary estimates of the third-quarter German and Eurozone GDP. This, along with the flash version of the Eurozone consumer inflation figures, will play a key role in influencing the common currency and produce some meaningful trading opportunities around the EUR/GBP cross.
On the other hand, the British pound struggled to gain any meaningful traction amid persistent Brexit-related uncertainties. Adding to this, fears that the UK government could take stricter lockdown measures to curb the rapid pace of growth in new COVID-19 infections further kept the GBP bulls on the defensive.
Despite the supporting factors, the EUR/GBP cross lacked bullish conviction and remained capped near a one-week-old descending trend-line resistance. Given that the cross has repeatedly bounced off a strong horizontal support near the key 0.9000 psychological mark, the mentioned barrier constitutes the formation of a bearish triangle.
This makes it prudent to wait for some strong follow-through buying before positioning for any further near-term appreciating move, back towards the 0.9100 mark. Conversely, a convincing breakthrough the 0.9000 horizontal support will be seen as a fresh trigger for bearish traders and pave the way for a further near-term depreciating move.
Technical levels to watch
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