- EUR/GBP defends the vital 200-day moving average.
- The gloomy economic outlook for the UK undermines the British pound and offers some support to the cross.
- Concern about the energy crisis in Europe weighs on the common currency and limits increases.
The EUR/GBP cross defends the all-important 200-day Simple Moving Average (SMA) support and for now appears to have halted its recent pullback from the nearly one-month high reached last week. The price is moving without a clear direction, with a slight bearish bias on Tuesday, below 0.8450.
The UK Manufacturing PMI unexpectedly fell into contraction territory at 46.0 for August, which is a negative factor for the pound and offers some support to the EUR/GBP cross. The data adds to concerns about a deeper economic recession and dwarfs the better-than-expected services PMI reading of 52.5 in August. However, increasing bets in favor of a 50 basis point rate hike by the Bank of England in September, coupled with a modest pullback in the dollar from two-decade highs, help limit pound losses. .
Elsewhere, the common currency continues to be weakened by concerns about an energy crisis in the Eurozone, which could drag the region’s economy into a faster and deeper recession. Indeed, European energy prices rallied to an all-time high after Russia announced it would cut off supplies to Europe via the Nord Stream pipeline for three days at the end of the month. Bulls seem unimpressed by the mixed Eurozone Manufacturing PMI, which improved to 49.7 in August, though it remains below 50, marking contraction.
The The fundamental picture is not entirely clear, which leads to not favoring aggressive positions. From a technical point of view there is no clarity either. A consolidation below 0.8300 could lead to further weakness, while a weekly close above 0.8480 (20-week moving average) to the upside could give the euro support to extend gains.
Technical levels
Source: Fx Street
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