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EUR to GBP Exchange Rate Hovers at 200 SMA Ahead of ECB Rate Statement

EURGBP Rebounds

Compared to the majors, volatility on the EUR to GBP exchange rate was limited yesterday. However, that could soon change as the ECB announces its rate decision on Thursday. EURGBP rallied to an intraday high of 0.8767, only to give up its gains and bottom at 0.8655. By the end of the New York session, the currency pair was 37 pips above its opening price at 0.8710.

It is widely expected that ECB President Lagarde will announce further easing on Thursday amid the coronavirus outbreak. A 10 basis point-cut is anticipated by market analysts. Some also say that the ECB will increase its targeted long-term operation (TLTRO) program which would provide cheap loans to banks. If this turns out to be the case, we could see the EUR to GBP exchange rate fall. The move would make the ECB more dovish that the BOE which has yet to take measures to ease. Incoming BOE Governor Andrew Bailey even hinted that the central bank is not keen on cutting rates.

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EUR to GBP Exchange Rate Outlook

On the daily time frame, it can be seen that EURGBP retraced some of its gains tot the 23.6% Fib level (when you draw from the low of February 25 to the high of March 9). After bouncing off support, however, the currency pair’s rally was limited by resistance at the 200 SMA. Yesterday’s candlestick closed as a shooting star which suggests that the EUR to GBP exchange rate may soon drop. It could fall to 0.8575 where it made highs in December 2019 and January 2020.

Meanwhile, the 1-hour chart suggests that buyers could soon resume their rally. EURGBP has made steady highs at 0.8745 while making higher lows. Consequently, an ascending triangle chart pattern has formed. This is considered as a bullish continuation pattern. This means that a strong convincing close above 0.8745 could trigger a rally to 0.9000 where the EUR to GBP exchange rate topped on October 10.