Piece Written By Nkosilathi Dube, Trive Financial Market Analyst 

In an unexpected reaction, the Pound temporarily lost its footing against the Euro as the EURGPB currency pair flew past its intermediate resistance level at the Fibonacci Retracement Golden Ratio, following the Bank Of England’s (BOE) 25 basis point rate hike. The market got what it expected as U.K. inflation remains nearly four times the BOE target, promoting a response by the central bank. 

With the European Central Bank (ECB) opening the door to a pause in the upcoming September meeting, following decent progress in lowering inflation, the Pound could be boosted in the medium term by a more aggressive BOE. Out of the 117 monetary policy decision-makers, just over three-quarters voted for a rate hike, signalling that the hawkish stance is mainstream among the BOE’s decision-makers. 

Technische Analyse 

The EURGBP currency pair rejected the 0.87009 level in July, leading to a swift move lower as downside momentum took precedence. The breakdown below the 100-day moving average signalled a downtrend; however, the market found support at the 0.85442 level, where upside momentum lurked.  

Given the swift move higher from the support level and past the 0.86410 level, which serves as the Fibonacci Retracement’s Golden Ratio, the EURGBP is now exposed to further upside possibilities, with the 0.87009 level likely if upside momentum persists. However, if the BOE’s interest rate hike and hawkish stance filter through the market reaction, a reversal could play out, further supported by overbought Relative Strength Index levels, leaving the 0.85442 level probable.  

Zusammenfassung 

For traders more optimistic about the Euro’s outlook, the 0.87009 level will likely serve as a level of significance to the upside. In contrast, the 0.85442 level will likely materialise if higher U.K. yields in the near term further support the Pound. 

Sources: Bank of England, Reuters, TradingView 

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