On Monday, the euro (EUR) was holding steady against the British pound (GBP) after experiencing a drop of about 2% over the last three weeks. The market for the euro remains somewhat muted, reflecting a cautious outlook, yet there seems to be difficulty for sellers to breach the 0.8500 level.
Increasing tensions in the Middle East, coupled with the closure of the Strait of Hormuz, are putting pressure on the euro. Additionally, rising oil prices and a slowdown in economic growth are prompting the European Central Bank (ECB) to consider further interest rate hikes.
In contrast, the British pound has displayed a degree of strength despite the ongoing US-Iran tensions and the political stalemate in the UK. Investors are showing optimism towards Andrew Burnham, who was recently named leader of the Labor Party and is expected to become Prime Minister on July 20.
Technical analysis: Bears showing signs of fatigue
Currently, EUR/GBP is trading at 0.8520, within a descending wedge. There are indications that the bearish momentum is waning. Notably, the 4-hour relative strength index (RSI) shows a bullish divergence as it trends toward the 50 midline. Furthermore, the Moving Average Convergence Divergence (MACD) line remains slightly above zero, suggesting a potential bullish correction ahead.
On the downside, immediate support is found at Friday’s lows around 0.8510, just above the wedge’s bottom near 0.8500. If prices drop below these levels, there is no clear support until the early June 2025 low at 0.8420.
On the upside, initial resistance aligns with the downtrend line barrier near 0.8530, followed by a previous support-turned-resistance area at 0.8535. If the price stabilizes above these levels, it could relieve some bearish pressure and shift focus toward the highs from July 2nd, 3rd, and 6th near 0.8570.
