EUR/GBP Price Forecast: Euro has lost steam and is likely to retest 0.8600

• Tariff fears are hitting the Euro worse than the Pound.
• The GBP has been firmer since UK Chancellor Reeves was confirmed in her role.
• EUR/GBP is hovering right above a significant support area at 0.8600.

The Pound is faring better than the Euro in a risk-averse market, as investors await more clarity about the size of the US tariffs and the date of their introduction. The Euro is trading lower, approaching a significant support area at 0.8600.

A strong German Industrial Production report, showing an unexpected growth in factory output, failed to cheer investors earlier on Monday, and the common currency extended losses after a widely expected contraction in the Eurozone's retail consumption.

The Pound, on the other hand, has gained some strength since the UK chancellor Rachel Reeves was confirmed in the role, although market concerns about the UK fiscal deficit remain looming, and are likely to weigh on a significant Pound recovery.

Technical Analysis: EUR/GBP is showing signs of topping

The Euro was capped at 0.8665 last week, and today's lower high at 0.8645 suggests that the bullish cycle might be coming to an end. The pair, however, should break below the July 3 and 4 low, at the 0.8600 area, to confirm the correction.

Further depreciation below the mentioned level would push the 4-Hour RSI below the 50 level, highlighting the completion of a 5-Wave (Elliott Wave) bullish cycle.

The next support level is the 38.2% Fibonacci retracement of June's rally, at 0.8550, ahead of the June 25 and 27 lows, at 0.8515, which is coincident with the 0.5= Fibonacci retracement of the mentioned cycle.

On the upside, a bullish reaction above the July 2 high, at 0.8670 cancels this view and shifts the focus to the year-to-date high, at 0.8740.