EUR/GBP traded near 0.8720 on Friday after rebounding from 0.8700 support. The pair pulled back from one-month highs at 0.8740 and has stalled in the middle of the recent range.
The Euro is set for a near 0.5% weekly gain and is up nearly 1% over the past three weeks. Risk-averse sentiment linked to the war in Iran has weighed on both currencies versus the US Dollar.
Eurozone Data And Uk Pmi
Eurozone data showing positive manufacturing activity and a moderate rise in inflation supported the Euro this week. UK manufacturing PMI data did not provide support for the Pound.
Technical signals suggest the short-term bias is mildly bullish but momentum is fading. On the 4-hour chart, the Relative Strength Index is 58, while the MACD is slightly below zero and the MACD line is below the Signal line.
Downside levels include 0.8705 and 0.8676, with a further support zone at 0.8630–0.8635, which held on March 23, 24, and 26. Resistance remains at 0.8740, with the next area at 0.8790–0.8800, which acted as a cap in December and early March.
We are seeing a familiar pattern stall around the 0.8720 level, reminding us of the consolidation we witnessed in early April 2025. The pair has struggled to decisively break the 0.8740 resistance, and the current waning momentum suggests we could be range-bound in the near term. This price action indicates that traders should prepare for sideways movement before a new catalyst emerges.
Policy Divergence And Volatility Strategies
Current economic data adds to this picture of consolidation, creating uncertainty for both the Euro and the Pound. Recent figures for February 2026 show UK core inflation remaining stubborn at 3.1%, keeping pressure on the Bank of England to hold rates. In contrast, Eurozone HICP has cooled to 2.5%, raising expectations that the European Central Bank might be the first to cut interest rates this summer.
Given this setup, a good strategy for the coming weeks involves selling volatility, as the pair seems likely to stay within a defined range. We see an opportunity in selling an options strangle, which involves selling a call option with a strike price near the 0.8740 resistance and a put option with a strike below the 0.8700 support. This approach profits from the passage of time and the pair’s failure to make a significant move in either direction.
However, we must watch for a potential breakout, especially if upcoming Eurozone data beats expectations. To prepare for a move higher, traders could consider buying call options with a strike price above 0.8740. Last year, we saw a similar test of this level in March and April 2025, and a decisive break could quickly target the 0.8800 area.
On the downside, a breach of the 0.8700 support level would be significant, as this floor has held up multiple times. If we see weaker-than-expected UK retail sales figures later this month, it could trigger a move lower. A break here would make buying puts or implementing a bear put spread attractive, targeting the support levels we identified back on March 23-26 of 2025, around 0.8635.
