The British Pound started the year with little optimism, as the outlook for their economy was among the bleakest of major developed economies. However, against all odds, it has become the best-performing currency pair since the start of 2023. With a banking sector isolated from external shocks, robust economic data and a tight monetary policy, the Pound has pressured the EURGBP currency pair, forcing it into a steady downtrend. 

There is little economic data from the respective economies to drive the price action in the upcoming week. However, in the UK, Manufacturing PMI statistics slid to 47.9 from the previous month’s figure of 49.3. Although this added to whether the BoE will pause their rate hike cycle, their chief economist Huw Pill left the door open for further rate hikes in his speech yesterday, claiming that it remains uncertain whether enough has been done to tame inflation. In the Eurozone, signs are also pointing towards a moderation of inflation. Their PPI declined by 0.5% in February, from the 0.3% decline in the earlier month. With both economies slowing down, sentiment could be the driver in the upcoming week. 

Technical 

On the 4H chart, the currency pair is evidently on a steady downtrend. The pair trades below the 50-day moving average, with the RSI indicating the presence of selling pressure. However, the pair opened above the daily pivot point at £0.8757, which now acts as a direct level of support. 

From the current level of £0.8772, the currency pair could retest the pivot support. If support holds, resistance at £0.8786 and £0.8796 could come into play in a test of the longer downtrend resistance. However, more fundamental data backing the Euro may likely be needed to catalyse a downtrend breakthrough and a structure disruption. 

If support at the pivot fails, there could be more downside on the cards before the currency pair tests the downtrend resistance. The first support level that could be of importance exists at £0.8728. From there, a breakdown could lead to the formation of a new lower low in the longer downtrend. 

Summary 

The EURGBP is trading in a steady downtrend. In the upcoming week, the currency pair could either test the downtrend resistance at £0.8796 or form a new lower low below £0.8728. With technical indicators signalling a bearish stronghold, the currency pair may need a strong fundamental pivot to spark a reversal. 

Sources: Koyfin, Tradingview