Current trend

The EUR/GBP pair continues to trade within a long-term downward trend, holding around 0.8415, but is currently correcting upwards in response to the results of the European Central Bank (ECB) monetary policy meeting.

The day before, the regulator maintained the refinancing rate at 4.25%, the deposit rate at 3.75%, and the marginal lending rate at 4.50%. Thus, officials took a pause in the cycle of easing monetary parameters, not daring to reduce borrowing costs for the second time in a row. The follow-up statement noted that current monetary policy continues to restrict financing conditions, with domestic price pressures remaining high, particularly in services. Officials also indicated that they do not undertake obligations regarding the further trajectory of changes in parameters. This circumstance has somewhat alarmed experts, although most of them expect two more interest rate adjustments in September and December. Moreover, ECB President Christine Lagarde noted at the end of the meeting that economic growth is likely to slow down in the second quarter, which is an important condition for making changes.

In turn, the likelihood of an early easing of monetary policy by the Bank of England is decreasing amid the publication of inflation data, where the Consumer Price Index on an annualized basis remained at 2.0%, and the Core CPI — at 3.5%, as well as statistics on the labor market, which demonstrated an insufficient slowdown in wage growth (from 5.9% to 5.7%, including bonus). Most likely, officials will abandon active actions in August and begin reducing borrowing costs no earlier than the fall.

In general, the difference in investor expectations regarding the further steps of the ECB and the Bank of England in the medium term will continue to put pressure on the EUR/GBP pair, so the resumption of negative dynamics in quotes seems very likely.

Support and resistance

The instrument rose to 0.8422 (Murrey level [0/8]); however, the key level for the "bears" seems to be the center line of Bollinger Bands (0.8440), a breakout of which could lead to a change in the current trend and continued growth to 0.8483 (Murrey level [2/8]) and 0.8514 (Murrey level [3/8]). A repeated downward breakdown of 0.8392 (Murrey level [–1/8]) will provide a new decline to targets 0.8361 (Murrey level [–2/8]) and 0.8331 (Murrey level [–2/8]).

Technical indicators don't provide a clear signal: Bollinger Bands are directed downwards and Stochastic is directed upwards, while MACD is declining in negative zone.

Resistance levels: 0.8440, 0.8483, 0.8514.

Support levels: 0.8392, 0.8361, 0.8331.

Trading tips

Short positions could be opened below 0.8392 with targets at 0.8361, 0.8331 and stop-loss at 0.8415. Implementation period: 5-7 days.

Long positions may be opened above 0.8440 with targets at 0.8483, 0.8514 and stop-loss at 0.8405.