July 1 (Reuters) - EUR/GBP has been locked in a technically significant battle since peaking at 0.8729 on May 15. According to LSEG data, the pair has repeatedly failed to reclaim the 100-day simple moving average, currently sitting at 0.8671 — a level that has emerged as the defining line of resistance in recent weeks.

The pattern of failed breakouts is a textbook bearish signal. Each intraday push above the 100-day MA has been met with renewed selling pressure, with the market closing back beneath it — what technicians refer to as a false break or bull trap. A brief close above the average on June 18 offered a fleeting glimmer of recovery, but it failed to attract follow-through buying and the pair quickly retreated. The repeated rejection of EUR/GBP advances signals that the medium-term trend remains firmly in sterling's favour.

The fundamental backdrop justifies the technical weakness. The Bank of England's MPC left rates unchanged at 3.75% on June 18, with two members actually voting for a 25 basis point hike — a notably hawkish split that keeps rate cut expectations firmly in check. UK CPI remains above the MPC's 2% target, and the Bank expects inflation to rise further in the second half of 2026.

By contrast, the ECB's cumulative 200 basis points of easing since June 2024 leaves it in a structurally more dovish position. Even after a 25 basis point hike at its June 11 meeting — prompted by Middle East-driven inflationary pressures — the policy differential continues to favour sterling-denominated assets on a carry basis.

Weak eurozone growth, persistently high energy costs, and geopolitical uncertainty add further headwinds for the euro.

As long as EUR/GBP remains capped below the 100-day MA, the path of least resistance points toward the June 2025 low of 0.8408. For bulls to regain control, a decisive, high-volume close above the moving average — followed by a successful retest as support — would be required before a recovery toward 0.8729 becomes credible.
EUR/GBP daily chart:

(Peter Stoneham is a Reuters market analyst. The views expressed are his own)