Short-Term Forex Technical Outlook: EUR/GBP

Expectations for a rate cut by the European Central Bank paired with the split amongst the Governing Council has dragged on the euro, and the EUR/GBP may continue to retrace the advance from November as investors hold long-term expectations for higher interest rates in the U.K. After reaching a low of 0.8233 on 11/28, the pair surged to a high of 0.9805 in December as the Bank of England slashed borrowing costs to a record-low in an effort to stimulate the ailing economy, and the lack of momentum to push back above 0.9480-90 (21.4% Fib) should continue to lead the pair lower over the near-term. Over the next few hours of trading, we may see the euro-pound find support at 0.8830-40 (61.8% Fib) and may attempt to retrace the sell-off from the previous week to fill-in the gap from the 120 SMA however, as equity futures foreshadow a lower open for the European and the U.S. markets, a drop in market sentiment could lead the pair lower over the week. Nevertheless, as the economic docket for the U.K. is expected to reinforce a weakening outlook for growth and inflation this week, deteriorating fundamentals is likely to weigh on the British pound, and the pair may continue to hold a broad range over the near-term as the downturn in the global economy intensifies.