#EURGBP @ 0.86793 is registering weekly losses of more than 1% due to UK’s Chancellor Kwarteng U-Turn in the tax cut program. (Pivot Orderbook analysis)

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• EUR/GBP is registering weekly losses of more than 1% due to UK’s Chancellor Kwarteng U-Turn in the tax cut program.
• EU and UK’s S&P Global PMIs, paint a gloomy outlook for both economies.
• EUR/GBP is headed to the downside, as the pair extended its losses below last week’s low.

The pair currently trades last at 0.86793.

The previous day high was 0.885 while the previous day low was 0.8752. The daily 38.2% Fib levels comes at 0.879, expected to provide resistance. Similarly, the daily 61.8% fib level is at 0.8813, expected to provide resistance.

The EUR/GBP extends its losses for the fourth consecutive day, down by more than 1%, as UK’s new government, led by PM Liz Truss, backpedaled a 45% tax cut, improving investors’ sentiment around the globe. Therefore, the EUR/GBP is falling from around daily highs at 0.8830, below the 0.8700 threshold as the North American session progresses. At the time of writing, the EUR/GBP is trading at 0.8675.

Traders’ sentiment improved on Monday. Even though the EU’s energy crisis continues and geopolitical tensions between Russia/Ukraine escalate, was no reason to impede the British pound from appreciating vs. the single currency.

Data-wise, S&P Global PMIs revealed in the Euro area fell to a 27-month low of 48.4 in the previous month, from August’s 49.6, further reinforcing the thesis that the single-currency economy headed into a recession.

Chris Williamson, the chief business economist at S&P Global, said, “The ugly combination of a manufacturing sector in recession and rising inflationary pressures will add further to concerns about the outlook for the eurozone economy.” In a Reuters poll in September, analysts see a 60% chance of a recession in the bloc.

Meanwhile, the UK’s figure for manufacturing activity increased from 47.3 in August to 48.4 in September yet remained in contractionary territory.

Aside from this, UK turmoil abated some following the release of PM Liz Truss’s budget presented on September 23, which announced more than GBP 45 billion in tax cuts, which sent 30-year Gilts bond yield above 5%, spurring a crisis in the UK. Pension funds, unable to meet margin calls, were forced to sell assets to meet additional funding needs, while the Bank of England (BoE) intervened to stabilise the markets.

During the day, the EUR/GBP tumbled below the 20-day EMA, which at 0.8756 opposed less to no resistance, as demand for GBP augmented as the UK’s Finance Minister, Kwasi Kwarteng, reversed the 45% tax cut. It should be noted that the RSI punched below the 50-midline, showing that sellers are gathering momentum. Intraday-wise, the EUR/GBP one-hour chart delineates the cross below the S2 daily pivot at 0.8695 and trading well below the EMAs. Therefore, a break below the September 22 cycle low at 0.8691 could open the door toward 0.8600.

Technical Levels: Supports and Resistances

EURGBP currently trading at 0.8679 at the time of writing. Pair opened at 0.8778 and is trading with a change of -1.13 % .

The pair is trading below its 20 Daily moving average @ 0.8756, above its 50 Daily moving average @ 0.8578 , above its 100 Daily moving average @ 0.8557 and above its 200 Daily moving average @ 0.8468

The previous day high was 0.885 while the previous day low was 0.8752. The daily 38.2% Fib levels comes at 0.879, expected to provide resistance. Similarly, the daily 61.8% fib level is at 0.8813, expected to provide resistance.

Note the levels of interest below:

• Pivot support is noted at 0.8737, 0.8695, 0.8639
• Pivot resistance is noted at 0.8835, 0.8892, 0.8933

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