Last week, the $EURGBP rallied right into the infamous sell zone between 0.8570 and 0.8600. And true to form, that zone held and the $EURGBP broke down last week right to the 50% Fibonacci level of the entire rally.
Being that price is bouncing along the 50% Fibonacci level to open the new week, it seems as though a corrective rally may be in the works. However, given the velocity of the euro’s weakness in the past 2 trading sessions, a rally could be very shallow. I favor a continued move into 0.8430 where the real line in the sand for bears lies. This previous support level also coincides with the 61.8% Fibonacci level making this the level to watch in trading this week. Above current price action is resistance between 0.8480 and the big psychological level at 0.8500. It would take a break below 0.84 or above 0.85 to see momentum in price action. Until then, expect price action to be choppy between these levels and dictated by data releases this week.
Last week the ECB pulled the rug out from euro bulls. While they maintained monetary policy, dovish comments from ECB members sent the euro swooning. The fundamental landscape remains positive for GBP. UK economic data is robust into the fall season proving to bulls that the summer recovery may actually have legs. After a quiet couple weeks, we get a slew UK data this week plus an interest rate decision from the Bank of England. While the market expects the BoE to remain on hold with monetary policy, data this week may cast the central bank in a hawkish light. Price moves will be sensitive to data releases into Thursday’s rate decision. Be mindful of the calendar and key levels this week.