The British Pound experienced a challenging week, depreciating against major currencies including the Euro, the U.S. Dollar, and the Japanese Yen. This broad weakness highlights significant shifts in the forex market, making the dynamic between the British Pound Versus Euro particularly noteworthy for traders and investors.
Pound Sterling’s Broad Weakness
The past week witnessed a notable downturn for the British Pound across the board. Against the U.S. Dollar (GBP/USD), the currency pair plummeted to a fresh yearly low. A sharp decline unfolded over the last four trading days of the week, with the pair shedding over 380 pips at its most extreme point. Adding to concerns for Pound bulls, the price action saw a decisive break below the 1.2300 support level before a temporary bounce around 1.2250. However, this respite proved short-lived as Friday’s Non-Farm Payroll (NFP) data from the US triggered another wave of selling pressure, pushing GBP/USD below the 1.2200 mark.
Currently, bearish momentum shows no signs of abating. The next significant level of support to watch on the downside is the psychological 1.2000 level, a price point not tested since early 2023.
GBP/USD Technical Outlook
GBP/USD Weekly Price Chart
Analyzing the technical indicators for GBP/USD, the Relative Strength Index (RSI) on the daily chart is nearing oversold territory. This condition, last seen in November, suggests potential for short-term pullbacks but doesn’t negate the prevailing bearish trend. For potential resistance levels in any corrective bounce, traders might monitor the 1.2250 psychological level, followed by the 1.2297 Fibonacci level, and further up at 1.2367.
GBP/JPY Faces Downward Pressure
Similar to GBP/USD, the British Pound also weakened considerably against the Japanese Yen (GBP/JPY). A bearish evening star pattern formed on the daily chart and confirmed on Wednesday, preceding a substantial sell-off on Thursday and Friday. GBP/JPY also tested crucial support zones. The 193.61-194.11 area, representing the lower boundary of a gap from 2008, initially provided some support on Thursday. However, sellers overpowered this level on Friday, driving the pair to a new monthly low.
Looking ahead, the focus for GBP/JPY shifts to lower support levels, particularly the 190.81 Fibonacci level, which is converging with a bullish trendline originating from the August and December swing lows.
GBP/JPY Technical Levels
GBP/JPY Daily Price Chart
Euro Gains Ground Against the Pound
In contrast to the Pound’s struggles against the Dollar and Yen, the Euro has shown notable strength when evaluated in the british pound versus euro context. The EUR/GBP pair has appreciated by 1.09% this week, marking its most significant weekly gain since January 2023. This bullish momentum propelled EUR/GBP towards the 23.6% Fibonacci retracement level of the broader two-year downtrend. This upward movement follows a period of consolidation lasting almost two months, during which sellers failed to push the pair decisively below the .8260 level.
EUR/GBP Weekly Performance
EUR/GBP Weekly Price Chart
Short-Term EUR/GBP Bullish Momentum
Having broken out to a fresh two-month high, the key question now for EUR/GBP is whether this breakout can evolve into a sustained bullish trend. Previous price action suggests that former resistance levels may now act as support. Potential support zones are identified in the .8311 to .8328 range. On the upside, immediate resistance is anticipated around the .8448 swing high, followed by the psychological .8500 level.
EUR/GBP Daily Chart Analysis
EUR/GBP Daily Price Chart
Looking Ahead for the British Pound and Euro
The divergence in performance between the british pound versus euro highlights the nuanced dynamics within the forex market. While the British Pound faces headwinds against multiple currencies, the Euro is exhibiting resilience and strength, particularly in the EUR/GBP pairing. Looking forward, the upcoming release of UK CPI data next Wednesday, preceding the US CPI release, will be crucial catalysts for potential shifts in currency valuations. These inflation figures will provide vital clues about the future monetary policy paths of the Bank of England and the European Central Bank, further shaping the trajectory of the british pound versus euro exchange rate.
Written by James Stanley, Senior Strategist
