EUR/GBP Extends Four-Week Slide on Diverging Economic Data

Summary:

EUR/GBP drops to a 17-month low as resilient UK business activity supports Sterling, while slowing Eurozone growth weighs on the Euro.

Sell EURGBP

EXP

Trading

0.83700

ENTRY

0.83000

TGT

0.84500

0.83725 +0.00045 +0.05%

Point

Flat

0.83000

TGT

CLOSING

0.83700

ENTRY

0.84500

EUR/GBP fell to a fresh 17-month low near 0.8360 on Friday, extending its four-week losing streak as stronger UK business activity supported the Pound, while slowing Eurozone growth weighed on the Euro. The pair is on track for an almost 3% decline over the past four weeks.

UK manufacturing PMI rose to 52.8 in October from 51.9, beating expectations of 51.8, while services PMI climbed to 53.1, defying forecasts for a slowdown. The stronger figures reinforce expectations of a potential Bank of England rate hike in November. Chris Williamson of S&P Global noted that the encouraging data could support robust UK growth through the winter, provided businesses avoid adverse surprises from government tax and spending measures.

Meanwhile, Eurozone manufacturing PMI slipped to 52.4 from 52.9, missing expectations, while services PMI fell to 51.7 from 53.0. Although German manufacturing activity improved to 54.2, its services sector weakened, reflecting uneven economic momentum across the region. In my assessment, the widening gap between UK and Eurozone business activity continues to favor Sterling, leaving EUR/GBP vulnerable to further losses unless upcoming data provide stronger support for the Euro.

Technical Analysis

EUR/GBP is extending its decline, trading near 0.8372, its lowest level in more than a year, after breaking out of a ten-week range between 0.8530 and 0.8613. The pair has lost about 250 pips since the late-September high near 0.8613, moving in a clean staircase of lower highs (0.8586, 0.8488, 0.8426, 0.8392) and lower lows. That suggests sellers remain firmly in control, although the move is stretched and a corrective bounce cannot be ruled out.

The immediate focus is on the 0.8379-0.8390 resistance region, a former support zone whose retest has so far failed, with the bounce stalling near 0.8382. A rejection here, or a failure to reclaim it on an H4 closing basis, could strengthen bearish momentum and open the door toward 0.8359, the current swing low. Below that the chart shows no structure until the 0.8300 area, which is the height of the full July-September range (0.8613 to the July low at 0.8455) projected from the break. If sellers maintain control, the pair could extend toward the prior major lows at 0.8281 and 0.8239.

However, the pair remains vulnerable to a squeeze if the recovery gains traction. A sustained move above 0.8392 could trigger a rebound toward 0.8410-0.8426, while a deeper correction could bring the broken 0.8438-0.8447 zone, the July low area, back into focus. A close above 0.8410 would invalidate the near-term bearish setup, and a break of 0.8426, the last major lower high, would signal a deeper correction.

Overall, EUR/GBP has a cautiously bearish short-term outlook, with a sustained break below 0.8359 needed to confirm further downside toward 0.8300 and then 0.8281-0.8239. Until that breakdown occurs, the pair could still stage a corrective retest of broken support within the broader downtrend.

TRADE RECOMMENDATION

SELL EUR/GBP

ENTRY PRICE: 0.8370

STOP LOSS: 0.8450

TAKE PROFIT: 0.8300

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Warren Takunda

Analysts

Warren Takunda, a seasoned finance leader specializing in the Middle East, is a trusted senior analyst with a proven track record. As head of the finance team, he excels in financial planning, analysis, and reporting. Warren's expertise in financial modeling and investment analysis delivers valuable insights to clients.

Rank

Articless

3156

Win Rate

63.79%

P/L Ratio

0.73

Focus on

XAUUSD, EURUSD, GBPUSD

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