Bulls get rejected at the 20-day SMA following ECB decision

• EUR/GBP peaked at a daily high of 0.8600 and then retreated below 0.8550.
• As expected, ECB hikes rates by 0.25% but didn’t commit to a hike in September.
• The 2-year German yield fell more than 1% to 3.23%.

On Thursday, the Euro weakened against most of its rivals, including the USD, GBP, AUD, and JPY, following the European Central Bank’s (ECB) decision to hike rates by 0.25% as investors perceived a dovish tone in Christine Lagarde’s presser making German yields decrease.

Like Federal Reserve (Fed) Chair Jerome Powell on Wednesday, Christine Lagarde confirmed she was “open-minded” towards the September meeting as the decision will depend on the economic and inflation outlook. In addition, she stated that the Council will not engage in forward guidance and will have the option of either increasing or maintaining interest rates.

On the other hand, the GBP traded weak on Thursday against most of its rivals as investors continue to bet on a less aggressive Bank of England (BoE). Ahead of the August 3 decision, the World Interest Rate Possibilities (WIRP) suggest that the odds of a 50 basis point (bps) increase dropped nearly to 35%, and markets are discounting a terminal rate of 5.75-6.0% vs. 6.5% early in July.

EUR/GBP Levels to watch

From a technical perspective, the EUR/GBP pair retains the short-term bearish bias according to indicators on the daily chart. The Relative Strength Index (RSI) remains in negative territory. At the same time, the Moving Average Convergence Divergence (MACD) printed a red bar following two consecutive weeks of green bars, indicating that the bears are in the driver’s seat.

Support levels: 0.8540, 0.8530, 0.8500 (cycle low).
Resistance levels: 0.8582 (20-day Simple Moving Average), 0.8600, 0.8630.

EUR/GBP Daily chart