EUR/GBP Edges Higher as Energy Prices Retreat

Traders' Opinions

Summary:

EUR/GBP edged higher on Monday as easing Middle East tensions pushed oil prices lower, offering relief to the energy-dependent Eurozone. Meanwhile, uncertainty surrounding the UK government's fiscal plans and the upcoming Bank of England meeting kept the Pound under pressure.

BUY EURGBP

EXP

TRADING

0.85560

Entry Price

0.86250

0.85000

0.85543 +0.00219 +0.26%

0.0

Pips

Flat

0.85000

Exit Price

0.85560

Entry Price

0.86250

The Euro strengthened against the British Pound on Monday, climbing back toward the 0.8540 area after finding support near 0.8530 at the end of last week. The pair continues to trade within the bullish trend established since mid-July, with buyers now targeting the recent three-week high around 0.8555.

The single currency benefited from improving sentiment after the United States and Iran paused military operations over the weekend, easing fears of prolonged supply disruptions in the Middle East. Brent crude has fallen roughly 9% from last week's peak above $96 to around $87 a barrel, providing much-needed relief for the Eurozone, where lower energy costs help ease inflation pressures and support economic activity.

The Pound, meanwhile, remained on the defensive as investors continued to assess Prime Minister Andrew Burnham's spending plans and their potential impact on the UK's fiscal outlook. Attention is also turning to this week's Bank of England policy meeting. While policymakers are widely expected to leave interest rates unchanged, markets will closely watch the voting split and Governor Andrew Bailey's guidance for clues on whether another rate hike remains on the table later this year.

Technical Analysis

EUR/GBP is attempting to extend its recovery after completing a bullish inverse head and shoulders pattern, a classic reversal formation that suggests bearish momentum has faded and a new bullish phase may be underway. The neckline breakout around 0.8525-0.8530 has shifted market sentiment in favor of buyers, with the pair now challenging the 0.8550-0.8560 resistance zone after printing a sequence of higher highs and higher lows.

The 0.8550 region remains the immediate obstacle. A decisive close above this level would confirm the inverse head and shoulders breakout and expose the next resistance at 0.8620-0.8630, where previous selling pressure emerged before July's decline. A sustained move through that zone would strengthen the bullish outlook further and open the door toward 0.8650.

On the downside, the neckline around 0.8525-0.8530 has now become the first key support and will be closely watched for confirmation of the breakout. As long as price holds above this area, the bullish structure remains intact. A break below it would increase the risk of a deeper pullback toward the 0.8510-0.8520 demand zone. Failure to defend that support would invalidate the reversal pattern and expose the July low near 0.8460.

Momentum indicators continue to support the recovery. The RSI is trending higher above the 50 level, indicating strengthening buying pressure without yet entering overbought territory. Meanwhile, the MACD has crossed above its signal line and continues to build positive momentum, reinforcing the view that buyers are gradually regaining control following the recent reversal.

TRADE RECOMMENDATION

BUY EUR/GBP

ENTRY PRICE: 0.85560

STOP LOSS: 0.8500

TAKE PROFIT: 0.86250

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