Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. Eight days ago the pair experienced a bearish turn. It has continued to move in a downward wave since then and today we find it at its lowest level since the middle of August.
Despite it not being a market for risky assets at the moment, the British pound is doing well. Economic data coming from the United Kingdom has been somewhat mixed, especially considering the spread of the delta variant of the coronavirus in the country and the thousands of people who have had to self-quarantine as a result of the government’s track and trace program. Even with no formal lockdowns, those measures have caused some economic disturbances. Still, fundamentals have been improving. For instance, the inflation rate climbed to 3.2% in August. It has remained consistently above the golden level of 2% for some time now, so experts are beginning to speculate that the Bank of England will have to take a hawkish action sooner rather than later, which is strengthening the pound.
In all fairness, the same factor about monetary policy tightening applies to the euro as well. The European Central Bank has so far carefully evaded any public discussion on asset purchases tapering, but the eurozone is seeing improvements in GDP growth, industrial production, employment, and inflation. As a result, a shift in policy seems very likely from the ECB as well. However, it is possible that it might already be priced in, considering that economic reports from the eurozone have been positive for a long while, while the UK improvements are a bit more recent. This can explain why the pound has an edge over the euro at present.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8543, with the pair currently trading below it. The daily support levels lie at 0.8522 (overcome) and 0.8507. The daily resistances are at 0.8558 and 0.8579. The indicators of technical analysis agree in strongly recommending a sell position today.
