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The pair pared some of its gains after the hawkish rate cut by the ECB. Intraday bias remains bearish as long as resistance 0.8500 holds. It hit an intraday high of 0.83570 and is currently trading around 0.83570.
The monetary policy is different by the European Central Bank (ECB) and the Bank of England (BoE) due to their unique situations in economic conditions. The ECB on 31 January 2025 decreased its interest rate to 3.75% to sustain growth and respond to inflation-related concerns in the Eurozone. Here they are displaying openness to deviate from other reserve banks, such as the Federal Reserve. This has been offset, though, by the BoE, which maintained its rate at 5.25% and is reluctant to reduce rates even as inflation softened to 3.2%.
This gap implies that the ECB is seeking to revive the economy whereas the BoE seeks to prevent inflation from increasing further. Thus, there will be greater volatility in the currency market and the euro could rally against the pound. It is a trend in the general policy among the central banks in which regional economies dictate their respective localized monetary policies.
Technical Analysis
The pair is currently trading above the 34- and 55-EMA on the 4-hour chart.
- Bearish Trend Confirmation: Any break below 0.8340 confirms an intraday bearish trend. A drop to 0.8300/0.8260/0.8220/0.8190 is likely.
- Near-Term Resistance: Current resistance is around 0.83850. 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: Neutral
Trading Recommendation
It is good to sell on rallies around 0.8400, with a stop loss around 0.8470 for a target price of 0.82245.
