EURGBP is moving inside a descending channel on its 1-hour time frame, indicating that the pair might be in for more losses. 

At the moment, price is testing support at the mid-channel area of interest and may make its way down to the channel support.

A countertrend setup at the bounce off channel support at the .7350 minor psychological level could lead to a move up to the top of the range around .7400. However, a downside break from support might also be possible if Greek debt talks continue its standstill.

Bear in mind that the negotiations between the new Greek government and the European Union haven’t produced a deal on Monday, as the anti-austerity camp refused to sign a deal that would allow the current bailout to carry on. This led to speculations that Greece would be unable to secure enough funding and may be forced to default on its debt.

Should this situation persist until the end of the week, the shared currency could suffer further selling pressure. A break below .7350 for EURGBP could mean a long-term move all the way down to the next support at .7000.

Other event risks for this setup include the BOE minutes which are set to be released mid-week. In their latest statement, the BOE seemed confident that the downturn in inflation could be translated to stronger spending and growth. They also indicated in the Inflation Report hearings that their next likely move will still be a rate hike, although they expressed openness for a rate cut if needed.

If the minutes reveal that policymakers are unanimous in projecting better times for the UK economy, the pound could draw more buyers in and push EURGBP lower. On the other hand, opposition from dovish members might also keep the pound’s gains in check and possibly lead to a move towards channel resistance or beyond.

By Kate Curtis from Trader’s Way