The Chunnel, also known as the EURGBP currency pair, has experienced four consecutive weeks of losses. However, bearish momentum is likely subsiding, given that the prior week closed with the most negligible loss.

The Euro Area’s inflation came in as expected at 7%, moving slightly higher from the prior month, signalling that the European Central Bank (ECB) has more work to do to lower it. The ECB and the Bank Of England (BOE) will likely implement more interest rate hikes to tame persistent inflation.

Technical

The EURGBP currency pair has maintained a downtrend, with the price well below the 100-day moving average. Support and resistance were established at the 0.86761 and 0.88338 levels, respectively.

The 0.86761 level was tested once after it was established, with price rejecting the level to move higher, signalling the presence of more demand over supply. If bulls commit to the upside, they could be met with a dynamic resistance at the 50% Fibonacci Retracement level at 0.87552, with the 0.87738 level as the next ceiling, which forms the Golden ratio of the Fibonacci Retracement.

Alternatively, if bearish traders awaken and recommence the downtrend, the 0.86761 level could entice them to take the pair lower, given that they outdo the bull’s current momentum with substantial volumes.

Summary

The EURGBP currency pair is rebounding from oversold RSI conditions, further supported by sticky Euro Area Inflation. However, given that the U.K. is in a far worse position with inflation still in double-digit figures, the Pound could be bolstered more by the likely stricter stance the BOE could take in comparison to the ECB.

Sources: Reuters, TradingView