EUR/GBP Monthly Technical Analysis for August 2015

The EUR/GBP finished lower in July and below a key long-term support angle, suggesting a strong downside bias. With the European Central Bank implementing quantitative easing and the Bank of England considering an interest rate hike before the end of the year, the interest rate differential and the divergence between central bank monetary policies favors the British Pound over the Euro at this time. This could put downside pressure on the Forex pair in August.

The Bank of England meeting on August 6 will likely set the tone of the market for the month. Recent comments from BoE Governor Mark Carney have him preparing U.K. households and businesses for higher borrowing costs. Signs of a greater dissent within the Monetary Policy Committee (MPC) are also strong indications that rates are set to move higher before the end of the year.

There is growing speculation that MPC members Martin Weale and Ian McCafferty will push for a rate hike sooner-rather-than later. This will certainly provide support for the British Pound. However, another unanimous vote to keep rates at historical lows could trigger a counter-trend rally.

The close below the long-term uptrending angle at .7050 this month is a sign of weakness. Overcoming this angle and sustaining the move will signal the presence of buyers.

A sustained move under the downtrending angle at .7039 will be a sign that the selling pressure is increasing. This could trigger an acceleration to the downside with the next target a long-term uptrending angle at .6793.

Look for volatility this month after the Bank of England decision on August 6. Watch for a bullish tone to develop on a sustained move over .7050 and a bearish tone on a sustained move under .7039.