EUR/GBP steadies as pair holds above key technical resistance

• EUR/GBP stabilizes on hopes of positive developments and talks in the Eurozone
• Europe's Manufacturing data shows slight signs of improvement, lifting the Euro.
• EUR/GBP moves toward the key 78.6% Fibonacci resistance level.
  

The Euro (EUR) is consolidating against the Pound Sterling (GBP) on Monday, with markets focusing on key economic data and geopolitical developments.

At the time of writing, EUR/GBP is trading above the 100-day Simple Moving Average (SMA) and is firmly supported above the key psychological level of 0.8400.

In the Eurozone, the manufacturing sector showed signs of recovery on Monday, with the HCOB Eurozone Manufacturing Purchasing Managers' Index (PMI) rising to 49.4 in May from 49.0 in April, marking a 33-month high. While markets interpreted the data as a potential sign that the sector may be moving out of the previous downturn, it remains below the 50.0 growth threshold, indicating that expansion has not yet been achieved.

The UK manufacturing sector continues to face challenges, with the S&P Global UK Manufacturing Purchasing Managers' Index (PMI) rising slightly to 46.4 in May from 45.4 in April. While this marks the highest reading since February, it remains below the neutral 50.0 threshold, indicating that the contraction is ongoing.

Adding to the complexity of the situation, the upcoming meeting between Germany's new Chancellor, Friedrich Merz, and US President Donald Trump could further influence EUR/GBP sentiment. Discussions on transatlantic relations, trade policies, and the Ukraine conflict may impact market expectations for the Euro's economic stability and geopolitical alignment. Any shifts in US-European relations could lead to changes in investor perception of the Eurozone's stability, thus influencing the EUR/GBP pair, especially given the current economic struggles in the UK.

EUR/GBP finds support above the 100-day Simple Moving Average

EUR/GBP continues to trade above the 100-day Simple Moving Average (SMA) at 0.8415 and above the 78.6% Fibonacci retracement level of the March-September 2022 move near 0.8428. The 50-day SMA now serves as resistance at 0.8472; a break of this level could open the door for a bullish continuation toward the 0.8500 psychological level.

The Relative Strength Index (RSI) is at 49, moving closer toward the neutral zone at 50.

For bears to regain confidence, a move below the 100-day SMA and 0.8400 could lead to a retest of the May low at 0.8378 and a potential return towards the prior trendline resistance, now support at 0.8350.

EUR/GBP daily chart

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