The Euro is close to 0.8800, bouncing back from 0.8745. The British Pound’s recent gains have slowed down after the UK budget announcement. EUR/GBP might encounter resistance around the earlier support level at 0.8795. Recently, the Euro has strengthened against a weaker Pound, recovering from a 0.8% loss over two weeks. The pair reached highs above 0.8780 during early European trading. Last week, the Pound rose after a UK budget that raised taxes eased concerns about public finances. At the same time, steady German inflation figures provided some support for the Euro.

Technical Analysis

Technically, the pair is bouncing back at the 61.8% Fibonacci retracement level of the previous rally, which is at 0.8742. The 4-hour RSI is above 50, and the MACD shows increasing positive momentum. The first resistance may appear at 0.8795, with additional resistance between 0.8820 and 0.8830. The high from November 14 at 0.8865 could represent the strongest resistance. Support levels are at Friday’s low of 0.8748 and the Fibonacci retracement at 0.8742. Below these, additional support might be found between the October 27 low of 0.8720 and the 78.6% retracement level at 0.8710. Today, the Euro is performing well, making it the strongest against the British Pound among major currencies.

Market Outlook

We see a notable bounce in EUR/GBP from the 0.8745 area. This suggests that the recent downward trend is slowing down. This change hints at a potential opportunity for a short-term rise in the Euro against the Pound. For traders, this could mean looking for strategies that take advantage of upward movement in the upcoming weeks. The boost the Pound got from the UK budget seems temporary, especially with last week’s UK retail sales showing a 0.5% contraction, raising new economic concerns. In contrast, the Eurozone’s final Manufacturing PMI for November was just released, at 50.2, slightly better than expected and indicating a slight expansion. This difference in data supports the case for a stronger Euro. Considering the technical situation, we are examining call options with strike prices aiming at the 0.8865 resistance level. A short-term expiration, possibly in late December or early January, should capture this anticipated move. Selling put options with a strike price below the key 0.8742 support could also be a good strategy to earn premium while betting on this support holding. We’ve seen similar patterns before, particularly after the UK’s mini-budget in late 2022. Initially, the market reacts strongly to fiscal announcements, but attention soon shifts back to actual economic performance. This past experience indicates that the Pound’s recent rally driven by the budget is unlikely to last without supporting economic data. Create your live VT Markets account and start trading now.

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