EUR/GBP Under Pressure: Policy Divergence and Technical Breakdown

The pair lost its shine on policy divergence between the ECB and BOE. Intraday bias remains bearish as long as resistance 0.8380 holds. It hit an intraday high of 0.83128 and is currently trading around 0.83132.

ECB's Dovish Stance

In January 2025, the European Central Bank (ECB) took a comparatively dovish position, hinting at potential rate cuts while applying a widely anticipated rate cut17. The ECB path is consistent with ongoing disinflation and the muted momentum of the Eurozone economy1. The ECB will continue to reduce rates in 2025 because of soft growth and declining inflation2. Markets expect the ECB to cut its deposit facility rate to 2% by June 2025, regarded as the neutral rate3. Still, other experts indicate that further cuts are possible if trade threats and global uncertainties worsen2. The ECB hopes to meet its 2% inflation target by 2025

Technical Analysis

The pair is currently trading below the 34- and below 55-EMA on the 4-hour chart.

• Bearish Trend Confirmation: Any break below 0.8290 confirms an intraday bearish trend. A drop to  0.8260/0.8220/0.8190 is likely.
   
• Near-Term Resistance: Current resistance is around 0.8380. Any violation above will push towards 0.8400/0.8450/0.8470/0.8500/0.8580. The bearish outlook would be invalidated only if the price goes above 0.8500.

Indicator Analysis (4-hour chart)

• CCI (50): Bearish
   
• Average Directional Movement Index: Bearish

Trading Recommendation

It is good to sell on rallies around 0.8340  with a stop loss around 0.8380 for a target price of 0.8220.