EUR/GBP Weekly Outlook

The EUR/GBP started the week with markets pinning high hopes on the European Central Bank initiating fresh stimulus measures to provide a comprehensive solution to the region’s debt crisis. But after the disappointment on Thursday, when the ECB offered no guidance or assistance in its monthly meeting and statement, traders became restless and hammered the euro below the 0.785 mark against the pound sterling. Mario Draghi said the ECB was likely to undertaking open market operations, such as buying bonds in the secondary markets, but failed to explicitly layout any plans to buy government debt from struggling European countries any time soon.

The GBP also faced a week of disappointing economic data with trade deficit hitting an all time high in June on Thursday. Data from the Office for National Statistics showed, deficit widened more than expected to 10.1 billion pounds ($15.82 billion) in June from 8.4 billion pounds in May, as weak demand for goods hampered exports. Earlier in the week, Industrial Production slumped to its lowest level in 20 years in June, and the Bank of England slashed its growth forecast for the year. 

The counter-trend rally in the EUR/GBP from 0.7755 is possibly finished at 0.7962, the intersection of a falling trend line and the swing bottom created on May 16, both of which have been tested quite a few times. EUR/GBP is all set to resume the broad down-trend, and in the coming week, prices are expected to find support at 0.7755, the break of which can see prices go to the next key support level of 0.7693. On the upside, 0.7900 is a strong resistance, and any upside break-out will turn the bias neutral.