Insights 
VT 
The Euro nears 0.8800, rebounding from 0.8745. The British Pound’s recent rally has cooled following the impact of the UK budget. EUR/GBP faces possible resistance around the previous support level at 0.8795.
Recently, the Euro has gained against a weaker Pound, recovering from a 0.8% loss over two weeks. The pair reached highs above 0.8780 in early European trading. Last week, the Pound increased after a tax-raising UK budget assuaged public finance concerns. Meanwhile, stable German inflation figures offered modest support for the Euro.
Technical Analysis
Technically, the pair rebounds at the 61.8% Fibonacci retracement of the prior rally at 0.8742. The 4-hour RSI rises above 50, and the MACD shows climbing positive momentum. Resistance might be met at 0.8795, with further resistances between 0.8820 and 0.8830. The November 14 high at 0.8865 could be the final resistance point.
Support levels are at Friday’s low of 0.8748 and the Fibonacci retracement at 0.8742. Below this, support may be found between the October 27 low of 0.8720 and the 78.6% retracement at 0.8710.
Euro showed strength today, being the strongest against the British Pound among major currencies.
Market Outlook
We are seeing a notable bounce in EUR/GBP from the 0.8745 area, suggesting the recent bearish momentum is easing. This shift indicates a potential opportunity to position for a short-term rise in the Euro against the Pound. For traders, this could mean exploring strategies that profit from upward movement in the coming weeks.
The boost the Pound received from the UK budget appears to be temporary, especially with last week’s UK retail sales figures showing a 0.5% contraction, which has renewed economic concerns. In contrast, the Eurozone’s final Manufacturing PMI for November was just released today, coming in at 50.2, narrowly beating expectations and signaling a slight expansion. This divergence in data supports the case for a stronger Euro.
Given the technical picture, we are looking at call options with strike prices aiming for the 0.8865 resistance level. A short-term expiration, perhaps in late December or early January, would capture this expected move. Selling put options with a strike price below the key 0.8742 support could also be a viable strategy to collect premium while betting on the floor holding.
We’ve seen this pattern before, especially when looking back at the volatility following the UK’s mini-budget in late 2022. The market initially reacts strongly to fiscal announcements, but the focus eventually returns to underlying economic performance. This historical precedent suggests that the Pound’s recent budget-driven rally was unlikely to be sustained without supporting economic data.
