Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. The trend entered a secondary downward wave at the end of February after a short correction. We are still within it, but this week the exchange rate of this pair has flattened a bit, so we might be seeing the limit to the downside.
This week the British pound sterling is not as strong as it has been so far in 2021. Some of the weakness was caused by the fact that Covid-19 vaccinations, where the United Kingdom shines, are becoming a bit less important for investors, at least for the time being. Right now bonds are the most relevant keyword in the financial markets, and both the dollar and the euro have attracted attention due to the rising bond yields in the US and the EU. In addition, this week there are no key events for the British pound to give it a boost. Though there are no significant downward pressures for the pound and we still expect it to remain strong in the long term, at the moment investors are just not that curious about it, which is allowing the euro to resist the bearish trend.
In fact, the future movement of this pair (at least in the short and medium terms) will be determined by today’s meeting of the European Central Bank. The ECB has expressed concerns over the increasing yields, especially where it comes to the German bund, and might try to regulate the market by increasing its own bond purchases. If this is decided today, the euro will weaken and the bearish trend of the EUR/GBP will resume. But if the European Central Bank does not take action today, the euro may receive a boost. The ECB meeting is going to outweigh any fundamental releases today.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8562, with the pair currently trading above it. The daily support levels lie at 0.8544 and 0.8530. The daily resistances are at 0.8576 and 0.8594. The indicators of technical analysis agree in strongly recommending a sell position today.
