The EUR/GBP cross extended this week’s retracement slide from near two-month tops and witnessed some heavy selling for the second straight session on Thursday. The selling bias picked up pace after the ECB announced its policy decision and dragged the cross to fresh weekly lows, around the 0.8555 region in the last hour.
As was widely anticipated, the European Central Bank left its key monetary policy settings unchanged at the conclusion of the July meeting and did little to provide any meaningful impetus. The ECB revised the forward guidance on rates and expects rates to remain at their present or lower levels until it sees inflation reaching 2% well ahead of the forecast horizon.
From a technical perspective, the EUR/GBP cross has now dropped back below the 61.8% Fibonacci level of the 0.8504-0.8670 strong move up. This coincided with a multi-month-old descending trend-line resistance breakpoint. A sustained break below could be seen as a fresh trigger for bearish traders and might have already set the stage for additional weakness.
The negative outlook is reinforced by the fact that technical indicators on the daily chart have again started drifting into bearish territory. Hence, a subsequent downfall towards the 0.8535-30 intermediate support, en-route the key 0.8500 psychological mark, or monthly lows touched last week, now looks a distinct possibility.
On the flip side, any meaningful recovery attempt now seems to confront stiff resistance near the 0.8585 confluence region – comprising 50% Fibo. level and 100-day SMA. A sustained strength beyond will shift the bias back in favour of bullish traders and push the EUR/GBP cross further beyond the 0.8600 mark, back towards testing the 0.8670 supply zone.