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EURGBP Flat Trading Dynamics

11/18/2022 11:45 AM

During the Asian session, the EUR/GBP pair shows a downward trend, consolidating at 0.8700 and local lows from November 8, renewed yesterday, when the European currency was actively declining, under pressure from the rhetoric of the US Federal Reserve, who spoke in favor of further tightening of monetary policy.

In particular, the president of the Federal Reserve Bank of St. Louis, James Bullard, noted that a further increase in the interest rate at the moment is "simply necessary." An additional signal to continue the current rate was relatively positive macroeconomic statistics from the US on the labor market: Initial Jobless Claims for November 11 decreased from 226.0K to 222.0K, which was better than market forecasts of 225.0K.

In turn, the position of the pound came under pressure after the publication of the medium-term budget plan from the Chancellor of the Exchequer, Jeremy Hunt, which was intended to stabilize the UK economy after the crisis caused by the policies of former Prime Minister Liz Truss. The official announced a reduction in public spending while increasing the fiscal burden: in particular, it is planned to increase the profit tax for oil and gas companies, as well as expand it to electricity producers. The country's government still expects a recession in the fourth quarter of this year: by the end of 2023, the gross domestic product (GDP) may decrease by 1.4%, while back in March, the forecast assumed an increase of 1.8%.

On the daily chart, Bollinger bands are trying to reverse into a horizontal plane: the price range is narrowing, reflecting the ambiguous nature of trading in the short term. The MACD indicator is falling, keeping a poor sell signal (the histogram is below the signal line). Stochastic, which has been demonstrating a steady decline throughout the current week, reversed into a horizontal plane, reacting to an attempt at corrective growth.

Resistance levels: 0.8740, 0.8777, 0.8817, 0.8864. | Support levels: 0.8692, 0.8645, 0.8606, 0.8569.

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