Buying Interest Could Emerge from a Key Fibonacci Zone

Forex

Economic

Summary:

EUR/GBP reached a local high of 0.8450 on March 11 but has since retreated to 0.8323, a level closely aligned with the 61.8% Fibonacci retracement.

BUY EURGBP

Close Time

CLOSED

0.83399

Entry Price

0.84100

0.83000

0.86835 +0.00091 +0.10%

21.5

Pips

Profit

0.83000

0.83614

Exit Price

0.83399

Entry Price

0.84100

The latest UK CPI report revealed that inflationary pressures eased more than expected, primarily due to moderate price increases in clothing and footwear.

Headline inflation rose 2.8% year-over-year, while core CPI—which excludes volatile items—advanced 3.5%. Meanwhile, services inflation, closely monitored by the Bank of England (BoE), remained steady at 5%, reinforcing concerns about persistent price pressures in certain sectors.

A cooling inflation trend dampens the outlook for the British pound, as it strengthens expectations for a more dovish BoE in upcoming policy decisions.

Following the Autumn Budget, UK Chancellor Rachel Reeves addressed the Confederation of British Industry (CBI) conference, underscoring the need for public services to sustain themselves without excessive government intervention.

She clarified that foreign financing would be used exclusively for investment purposes, rather than to cover daily government expenditures. Additionally, Reeves confirmed that no further tax increases are planned, responding to backlash from businesses over the recent hike in employer National Insurance (NI) contributions from 13.8% to 15%.

This stance suggests that significant spending cuts may be on the horizon as the government seeks to balance fiscal discipline with economic stability.

Investors will now turn their attention to the UK’s Q4 GDP report and February’s retail sales data, both set for release on Friday.

Eurozone Manufacturing Shows Signs of Recovery, But Services Disappoint

In the Eurozone, manufacturing contraction eased, but services activity fell short of expectations, according to the latest HCOB PMI survey.

The Manufacturing PMI improved to 48.7 in March, up from 47.6 in February, surpassing market expectations of 48.

However, the Services PMI declined to 50.4 from 50.6, missing forecasts of 51 and marking a four-month low.

As a result, the HCOB Composite PMI edged up slightly to 50.4 from 50.2, reflecting a fragile recovery across the region.

European Central Bank (ECB) President Christine Lagarde emphasized that the ECB cannot commit to a fixed rate path due to heightened uncertainty surrounding global trade conditions.

While the disinflation process remains on track, Lagarde warned that the Eurozone remains highly vulnerable to shifts in tariffs, complicating the ECB’s economic forecasts.

“In the face of rising uncertainty, we will maintain a data-dependent, meeting-by-meeting approach to determine the appropriate stance for monetary policy,” Lagarde stated on Thursday. “We are not precommitting to any specific rate trajectory.”

The recent decline in inflation has allowed the ECB to gradually lower borrowing costs, with the latest quarter-point rate cut bringing the deposit rate down to 2.5%. However, the timing of future rate cuts has become increasingly difficult to assess, given uncertainties surrounding. Buying Interest Could Emerge from a Key Fibonacci Zone_1

Buying Interest Could Emerge from a Key Fibonacci Zone_1

Technical Analysis

EUR/GBP reached a local high of 0.8450 on March 11 but has since retreated to 0.8323, a level closely aligned with the 61.8% Fibonacci retracement. Additionally, this zone is near the 50% retracement, making it a high-probability area for a potential bullish reversal.

Historically, Fibonacci retracement zones often serve as strong support levels, especially when they align with other technical factors.

Another key element to watch is the 200-period moving average, which is acting as dynamic support in this area. If EUR/GBP closes above this moving average and holds, it could reinforce a bullish recovery scenario.

Additionally, the Relative Strength Index (RSI) recently dropped to 27, signaling that the pair has entered oversold territory. This suggests that bearish momentum may be weakening, increasing the likelihood of a bounce from current levels.

Trading Recommendations

Trading direction: Buy

Entry price: 0.8340

Target price: 0.8410

Stop loss: 0.8300

Validity: Apr 04, 2025 15:00:00

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