EUR/GBP has dropped over 0.60% after breaking out of its recent range. The pair aims to reach 0.8800 and higher, with support between 0.8645 and 0.8660. The EUR/GBP uptrend remains strong after moving past a brief consolidation last week. Daily MACD indicators support this momentum, with targets set at 0.8800 and potential projections at 0.8850 and 0.8875.

Short Term Pullback Considerations

If there’s a temporary pullback, support could be around 0.8660 or 0.8645, within the rising channel. Upcoming goals include the channel’s upper limit at 0.8800 and further projections. Given the upward trend, we suggest that traders consider taking bullish positions. Any short dips towards the support in the rising channel should be seen as buying opportunities, aligning with the recent breakout. The overall economic outlook backs this technical viewpoint. The monetary policies of the two central banks are diverging. Recent figures show Eurozone inflation rising to 2.6% in May, while the European Central Bank is expected to lower interest rates sooner than the Bank of England. This difference could increase pressure on the currency pair.

Diverging Monetary Policies

On the other hand, the UK is grappling with stubborn inflation, especially in its key services sector, which recently saw a 5.9% annual rise. This ongoing price pressure makes the central bank reluctant to reduce borrowing costs soon. The varying policy approaches are a major reason behind our current perspective. Historically, the 0.8800 area has been a significant psychological and technical barrier. Earlier rallies in 2022 and early 2023 struggled in this range, marking it as a vital test for the current uptrend. A clear break above this level would show strong buyer confidence. Thus, we recommend buying call options with strike prices targeting the 0.8800 to 0.8850 range. Traders might look for options expiring in four to six weeks to give the trend time to develop fully. This strategy provides a defined-risk way to profit from the expected rise. However, it’s essential to manage risk carefully. The identified support zone is critical. If the price drops below this area, our bullish outlook would be invalidated, prompting us to close or adjust positions accordingly. Create your live VT Markets account and start trading now.

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