EURGBP is still trading around the top of its range on the 4-hour time frame, as traders are waiting for the upcoming ECB statement. Price has been testing the resistance at the .7400 major psychological level for quite some time and has indicated a bit of downside momentum on a break below a short-term consolidation pattern.
However, traders still seem to be hesitating to take the pair any lower ahead of a top-tier event. Stochastic is indicating oversold conditions, which means that an upside break might be possible. In that case, price could head up by at least 350 pips or roughly the same size as the range formation.
The 100 SMA is below the 200 SMA for now, suggesting that the path of least resistance is to the downside. If so, price could head back towards the range support at the .7050 minor psychological level.
The main catalyst for a move might be the ECB statement, although the central bank is still widely expected to keep monetary policy unchanged for the time being. In their previous announcement, Draghi said that they’re keeping the door open for further easing should inflationary pressures keep weakening. The final CPI for the euro zone indicated a 0.1% drop in price levels, which meant that deflation is in play.
Furthermore, data from the top economies such as Germany suggests more downside in the region’s economic data. Producer prices have also been on the decline, indicating increased downside pressure on overall inflation. With that, the ECB might give a dovish statement and additional easing hints, potentially leading to more euro losses.
Take note, though that, traders may have already priced in downbeat expectations for the event so any upside surprise might spur a relief rally.