EUR/GBP dips back under 0.8400 on technical selling/“dovish” Lagarde commentary, will bulls buy the dip? By Frank_Macro EURGBP ECB BOE Growth
Technical selling on the break of a descending triangle and “dovish” comments from ECB’s Lagarde sent EUR/GBP back under 0.8400.
EUR/GBP broke below a short-term descending triangle on Friday as the euro weakened on further dovish sounding rhetoric from ECB Presidentand as pound sterling saw some relief after not as bad as feared December GDP figures. Though the pair had been consistently posting lower highs since the start of the week, support at 0.8410 had been holding firm. That support broke during the late Asia Pacific session/early European session trade, with EUR/GBP having now dipped back below the 0.
“The recovery will probably lose momentum in the course of the year” analysts at Commerzbank noted. “High inflation, tax increases in April and the BoE's interest rate hikes are a burden on the economy” they continued. The British Chambers of Commerce agrees. Its head of economics Suren Thiru stated that “the UK economy is facing a materially weaker 2022 as the crippling burden of rising inflation, soaring energy bills and higher taxes on consumers and businesses dampens activity.
The net result might be that EUR/GBP has finally become a “buy on dips” rather than a “sell on rallies”, at least as far as longer-term swing traders are concerned. The 50% Fibonnaci retracement back from this week’s multi-week highs in the upper 0.8400s to last week’s sub-0.8300 lows at 0.8380 might well be such a level where traders are enticed to buy the pullback.
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