EUR/GBP Price Analysis: Bulls got rejected at the 100-day SMA ahead of British Retail Sales

• EUR/GBP peaked at a daily high at the 100-day SMA at 0.8700 and then closed at 0.8650.
• British and German yields rose on Thursday, but 2-year yield differentials favour the Euro.
• Consumer Confidence in the EU dropped but was lower than expected.
• All eyes are now on British Retail Sales on Friday’s session.

The EUR/GBP reversed its course during the American Session after getting rejected at the 100-day Simple Moving Average at 0.8700 and closed at 0.8650. European data was released with Consumer Confidence dropping in July but lower than expectations, while the German Producer Price Index (PPI) declined 0.3% in June, and the annualised measure dropped to 0.1%.

Regarding the next ECB decision, tightening expectations remain steady. Markets discount a 25 basis point (bps) hike next week, then bet on nearly 60% odds of a similar hike in September and is priced mainly for the December meeting. In the meantime, German yields saw significant increases on Thursday, with the 2, 5 and 10-year rates displaying more than 2% increases.

On the other hand, the GBP continues struggling to find demand following soft inflation figures reported on Wednesday. On Friday, Retail Sales from June in the UK will be reported, and they are expected to have increased by 0.2% and decelerated from their previous figure of 0.3%. They will give a more precise outlook on the British economic situation to model their expectations regarding the Bank of England’s next steps. As for now, the odds of 50 basis points (bps) have fallen to nearly 45% for the next meeting in August, and investors are seeing a terminal rate of 5.75%.

EUR/GBP Levels to watch

The technical outlook of the daily chart implies that the bulls are in command for the short term, but if they fail to conquer the 100-day SMA after being rejected twice this week, it could trigger a downward leg. Meanwhile, the Relative Strength Index (RSI) stands flat above 50.00, while the Moving Average Convergence Divergence (MACD) prints rising green bars, indicating a buying momentum.

Support levels: 0.8620,0.8600,0.8570.
Resistance levels: 0.8700 (100-day SMA), 0.8730 (200-day SMA), 0.8750.

 

EUR/GBP Daily chart