EUR/GBP extends its losses to four consecutive days, below 0.8680

  • EUR/GBP posts weekly losses of more than 1% due to British Chancellor Kwarteng’s spin on the tax cut program.
  • The EU and UK global PMIs paint a gloomy picture for both economies.
  • EUR/GBP heads lower as the pair extended its losses below last week’s low.

The EUR/GBP extended its losses for the fourth consecutive day, down more than 1%, as the new UK government, led by PM Liz Truss, backtracked on the 45% tax cut, improving investor sentiment in the all the world. Therefore, EUR/GBP is falling from daily highs at 0.8830, below 0.8700 as the North American session progresses. At the time of this writing, the EUR/GBP is trading at 0.8675.

Trader sentiment improved on Monday. Despite the ongoing EU energy crisis and the escalating geopolitical tensions between Russia and Ukraine, there was no reason why the British pound could not appreciate against the single currency.

As for the data, the S&P global PMI revealed in the euro zone fell to the lowest level in 27 months, 48.4, from 49.6 in August, which further strengthens the thesis that the economy of the single currency is headed for a recession.

Chris Williamson, chief business economist at S&P Global, stated: “The ugly combination of a receding manufacturing sector and rising inflationary pressures will heighten concerns about the outlook for the eurozone economy” in a September Reuters poll. , analysts see a 60% chance of recession in the bloc.

Meanwhile, the UK manufacturing activity data increased from 47.3 in August to 48.4 in September, although it remained in contraction territory.

Apart from this, the turbulence in the UK subsided somewhat following the publication of Prime Minister Liz Truss’s budget, presented on September 23, announcing more than £45bn in tax cuts, causing the performance of 30-year Gilt bonds exceeded 5%, causing a crisis in the UK. Pension Funds, unable to meet margin calls, were forced to sell assets to meet additional funding needs, while the Bank of England (BoE) stepped in to stabilize markets.

EUR/GBP Technical Analysis

During the day, EUR/GBP fell below the 20-day EMA which at 0.8756 met minor resistance as demand for GBP surged as UK Finance Minister Kwasi Kwarteng reversed the cut 45% tax. It is worth noting that the RSI came in below the 50 midline, which indicates that the sellers are gaining momentum. Intraday, the EUR/GBP one hour chart outlines the cross below the S2 daily pivot at 0.8695 and trades well below the EMAs. Therefore, a break below the 22nd Sep cycle low at 0.8691 could open the door towards 0.8600.

EUR/GBP

Overview
last price today 0.8679
daily change today -0.0099
Today’s daily variation in % -1.13
Daily opening today 0.8778
Trends
daily SMA20 0.8756
daily SMA50 0.8578
daily SMA100 0.8557
daily SMA200 0.8468
levels
Previous daily high 0.885
Previous Daily Low 0.8752
Previous Weekly High 0.9254
Previous Weekly Low 0.8752
Previous Monthly High 0.9254
Previous Monthly Low 0.8566
Daily Fibonacci of 38.2% 0.879
Daily Fibonacci of 61.8% 0.8813
Daily Pivot Point S1 0.8737
Daily Pivot Point S2 0.8695
Daily Pivot Point S3 0.8639
Daily Pivot Point R1 0.8835
Daily Pivot Point R2 0.8892
Daily Pivot Point R3 0.8933

Source: Fx Street

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