The BOE is up today!
Will the central bank’s event extend EUR/GBP’s days-long downtrend?
Or is it ready for a trip to higher areas of interest?
In case you missed it, EUR/GBP has been in a downtrend since earlier this month when the pair got rejected at the .8830 levels.
One possible reason is that traders don’t see the European Central Bank (ECB) having much more room for further interest rate hikes despite the members’ conviction to fight high inflation.
Meanwhile, stubbornly high inflation in the U.K. combined with still okay-ish employment numbers are giving further rate hike vibes for the Bank of England (BOE).
Let’s see if the short-term downtrend holds up today.
EUR/GBP has already broken above a trend line resistance that’s been around all month.In addition to that, the 100 simple moving average (SMA) looks set to cross above the slower 200 SMA on the 15-minute time frame.
The BOE is expected to raise its interest rates by 25 basis points today, something that everyone and their neighbors already know about.
A buy-the-rumor, sell-the-news situation could drag the pound against the euro and push EUR/GBP back to its .8700 intraday resistance. Bullish momentum could even bump up the pair to the .8730 major area of interest!
Before you buy EUR/GBP like there’s no tomorrow, remember that BOE will also publish new economic projections.
Lower growth and employment estimates may still put the BOE in the “not much room left for more rate hikes” club with the ECB and extend EUR/GBP’s downtrend to new monthly lows.
For now, I’ll be looking for a long opportunity somewhere around the S1 (.8680) of the Standard Pivot Points. I’ll be looking at the .8700 psychological handle and .8730 major inflection point as potential profit targets.
Again, the play will depend on what the BOE has to say about the economy and how the markets react to it.
If you’re planning to trade the pair today, make sure you’re aware of EUR/GBP’s average volatility before you execute your trading plans!
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