EUR/GBP extended its decline for a seventh session, edging back towards the year-to-date low in the 0.8460–0.8455 area at the start of the week. The euro stayed under pressure as concerns over France’s worsening debt situation raised the risk of contagion to other highly indebted euro area members ahead of next year’s French presidential election, sharpening worries about the future fiscal stance.
Momentum indicators stayed bearish, with MACD in negative territory and the line still falling, while RSI moved into oversold levels near 25, signalling the move may be stretched. Any rebound faces resistance around 0.8500 and then near 0.8540; a sustained break could push the cross above 0.8600, where the 200-day EMA sits, and a daily close beyond that level would temper the bearish bias. On the downside, traders may look for a break below the prior YTD trough in the mid-0.8400s, opening a move towards 0.8400 and then the May 2025 swing low near 0.8380.
Political And Fiscal Risks Fuel Euro Weakness
We advise derivative traders to approach the EUR/GBP cross with a downward bias in the coming weeks as political and fiscal anxieties weigh heavily on the shared currency. France’s public debt, which has remained stubbornly high above 110% of GDP, continues to stoke fears of a wider Eurozone crisis ahead of the crucial 2027 French presidential election next year. This political uncertainty keeps the Euro vulnerable, meaning we should view short-term rallies as potential opportunities for selling.
Technical Outlook And Trading Levels
However, we must note that the market is currently showing signs of being overextended, with the Relative Strength Index (RSI) hovering deeply in oversold territory near 25. This technical setup suggests that while the broader trend is downward, we might see immediate dip-buying or a temporary corrective bounce. Traders should look for initial resistance near the 0.8500 psychological level before committing to heavy short positions.
If a short-covering rally pushes the pair above 0.8540, we recommend watching the key 200-day Exponential Moving Average near 0.8600. A daily close above this major pivotal barrier would shift the immediate bearish outlook and signal a broader corrective rebound. Until such a breakout occurs, we expect any upward moves to face intense selling pressure.
For those looking to trade the continuation of the downtrend, we suggest waiting for a confirmed break below the recent year-to-date low in the mid-0.8400s. Such a move would likely clear the way for a drop toward the 0.8400 support mark and potentially test the key May 2025 swing low near 0.8380. Utilizing derivative contracts to manage these precise support and resistance boundaries will be crucial as volatility fluctuates.
