EUR/GBP declines in a channel

Note: This section contains information in English only.
Source: Dukascopy Bank SA


Since February 2021, the EUR/GBP currency exchange rate has been declining in a wide channel down pattern. From a larger fundamental perspective the trend can be explained with the fact that the European Central Bank ignores inflation and keeps monetary stimulus intact, and the Bank of England has been reducing stimulus and even implemented interest rate hikes. Namely, the supply of Euro continues to increase as the GBP supply and availability decreases.

Most recently, the currency pair has bounced off the 2020 low level and the lower trend line of the channel down pattern. Due to that reason, the pair has recovered to the middle of the channel during the first week of February. On February 9, the pair was finding support in the 50-day simple moving average at 84.20. Future forecast scenarios start from what would happen at the SMA.

In the case that the 50-day simple moving average provides enough support for a surge to start, the EUR/GBP could aim at the 85.00 level and the 200-day simple moving average. A move above the 85.00 mark would test the resistance of the upper trend line of the channel down pattern.

On the other hand, a decline below the 50-day SMA could find support in round exchange rate levels at 0.8350 and 0.8300, before reaching the lower trend line of the channel down pattern and the low level zone at 0.8275/0.8287.
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