The price is near the lower boundary of a consolidation range between 0.886 and 0.861.
Upward corrections within the consolidation are breaking to increasingly lower levels, while at the same time testing resistance around 0.863.
The EMA100 has crossed the EMA200 from above.
Recommendation:
Short position (Sell) on EURGBP at the market price.
Target price (Take Profit; TP): 0.8400
Stop Loss (SL): 0.8817
EURGBP (D1)
Source: xStation5
OPINION :
The EURGBP rate is once again testing the lower boundary of the consolidation, which can also be treated as a developing 1:1 pattern, potentially ending with a downside breakout. The repeated defense of the ~0.86 level indicates the strength of this zone; however, increasingly weaker upward corrections within the consolidation reveal buyer weakness and point to the likely direction of further price movement.
Methodology and assumptions:
The recommendation is based on technical analysis of the chart, in particular EMA moving averages and Fibonacci levels.
The target level was determined based on Fibonacci levels.
The protective stop-loss order was set based on a favorable risk-to-reward ratio and with reference to a Fibonacci level.
US Dollar Index declines on fading safe-haven demand as a US-Iran deal eases inflation and interest rate concerns.
Washington and Tehran announced Sunday they have reached a peace agreement, which will officially take effect this coming Friday.
The CME FedWatch tool shows December Fed rate hike odds falling to nearly 27% after the peace deal.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is losing ground and trading around 99.50 during the Asian hours on Monday. The Greenback declines on fading safe-haven demand following reports that the United States (US) and Iran reached a deal to end their conflict, easing concerns about inflation and higher interest rates.
Washington and Tehran said on Sunday that they have reached an agreement that will take effect on Friday. US President Donald Trump stated that the US is lifting its naval blockade on Iranian ports and that the Strait of Hormuz will reopen after the agreement is signed.
The United Kingdom (UK), France, Germany and Italy said that the countries were prepared to lift sanctions on Iran in response to steps on its nuclear program after the US and Iran reached a deal to end their war.
Iran’s National Security Council confirmed a ceasefire agreement with the US, adding that final deal talks will start after the other party fulfills commitments under the memorandum of understanding. Iranian officials said the maritime blockade against Iran should end immediately and entirely.
The CME FedWatch tool indicates that the markets are pricing in nearly a 27% probability of a US Federal Reserve (Fed) interest rate hike in December this year after the peace deal, down from 40% a week ago.
EUR/USD edges higher to around 1.1610 in Monday’s early European session.
The US and Iran announced a framework deal for peace.
ECB’s Nagel said the central bank is ready to hike again in July if necessary.
The EUR/USD pair gains traction to near 1.1610 during the early European trading hours on Monday. The reports that the US and Iran have reached a deal to reopen the Strait of Hormuz improved risk sentiment, supporting the Euro (EUR) against the US Dollar (USD). The US Federal Reserve (Fed) interest rate decision will be in the spotlight later on Wednesday.
Washington and Tehran have announced a framework deal for peace, which will be signed in Switzerland on Friday. US President Donald Trump said the US is lifting its naval blockade on Iranian ports and that the Strait of Hormuz will reopen after the agreement is signed.
The Fed is widely expected to keep its benchmark interest rate unchanged at a target range of 3.50% to 3.75% at its upcoming policy meeting on Wednesday. Traders will closely monitor the press conference and take more cues about how new Fed chair Kevin Warsh will lead the US central bank into its next era. Any hawkish remarks from Fed officials could lift the Greenback and act as a headwind for the major pair.
Last week, the European Central Bank (ECB) hiked its key interest rates, saying “the war in the Middle East is generating inflation pressures.” This marks the first rate increase since September 2023, after seven consecutive meetings where interest rates were kept on hold.
ECB Governing Council member Joachim Nagel said on Friday that the central bank is prepared to raise interest rates for a second straight meeting in July, if the shock from the war in the Middle East requires it.
The USDNOK exchange rate ended yesterday’s session above the 100-day exponential moving average (EMA100; purple).
Brent crude oil futures (OIL) are losing ground for the second consecutive session, slipping below 90 USD per barrel—their lowest level since April 20, 2026.
CPI inflation in Norway fell to 3.1% in May from 3.4% in April.
USDNOK is gaining momentum, increasingly solidifying a trend reversal on a pair whose volatility in recent months was primarily shaped by upward pressure on oil prices. Over the past two weeks, the price crossed three exponential moving averages (the 10-, 30-, and 100-day EMA; yellow, light purple, and dark purple, respectively) and successfully defended support where the EMA100 overlaps with the 50.0 Fibonacci retracement level of the latest downward wave. This technical bullish momentum is also well-supported by geopolitical and macroeconomic realities. Fluctuations in the Trump administration’s stance toward Iran did not trigger significant volatility (by recent months’ standards) in oil contracts, and the cancellation of an attack planned for yesterday contributed to a sharp drop in commodity prices.
This suggests that, for the market, the worst regarding the Strait of Hormuz is already behind us, thereby causing the risk premium for oil-producing countries’ currencies to fade out. Alongside the correlation between the Norwegian krone and oil, the latest inflation reading from Norway indicated a second consecutive drop in CPI, with economists forecasting a further decline in price pressure—particularly in the food sector, which is vital for households and their expectations. Meanwhile, in the US, hawkish expectations are mounting for the Fed (OIS curve imlies 73% chance for a hike bedore the end of 2026), benefiting the greenback. Therefore, the monetary policy trajectories of both economies consistently support a continuation of the upward move in USDNOK. A short-term risk remains the near-overbought condition of the pair. The RSI sits right below the 70-point threshold (currently at 66.4), which may discourage investors from pushing the exchange rate higher without a minor technical correction.
Methodology
The recommendation was prepared based on a technical analysis of the USDNOK chart and a fundamental analysis of the discussed economies (monetary policy in Norway and the US), as well as the exchange rate’s correlation with crude oil prices. The direction of the recommendation was determined using moving averages and market expectations regarding Fed policy. The Take Profit and Stop Loss levels were set using Fibonacci retracements and price action (TP1 and TP2 at the 78.6 and 100 Fibo levels of the last downward wave; SL at the 38.2 Fibo level).
pril 2026 as a result of the escalating conflict in the Middle East. According to the latest data from the Office for National Statistics (ONS), this marks the first monthly GDP decline since August 2025. Although this contraction aligns with forecasts from economists polled by Reuters, it represents a sharp trend reversal from March, which recorded a 0.3% growth. However, looking at the less volatile three-month perspective, real GDP grew by 0.7% in the period to April 2026, demonstrating that the British economy entered the current crisis on relatively stable foundations.
Chart 1: Real and nominal GDP in the United Kingdom (upper panel) and quarter-on-quarter change (lower panel). In Q1 2026 (January–March), the UK economy grew by 0.6%, offering a solid base by British standards before the effects of the Middle East war materialized. Source: XTB Research based on ONS/Bloomberg data.
How the Iran Conflict Stalled Growth in the United Kingdom
The main catalyst for April’s slowdown is the war between Iran and the US, which recently passed the 100-day mark. The effective blocking of the Strait of Hormuz—a crucial shipping route for oil and many other commodities—paralyzed global supply chains and triggered a sharp surge in energy and fuel prices. As a net energy importer, the UK is exceptionally vulnerable to international energy shocks. A sudden surge in prices at petrol stations forced motorists to drastically cut consumption in April, reversing the positive growth impulses seen at the beginning of the year. Furthermore, ONS surveys revealed widespread complaints from businesses regarding falling turnovers and rising production costs across the wholesale, manufacturing, and transport sectors.
Sector Breakdown: Slump in Services, Stagnation in New Construction
April’s economic slowdown was characterized by uneven performances across core industrial sectors:
Services Sector: Recorded a 0.2% decline, becoming the primary driver of the monthly GDP drop. The arts, entertainment, and recreation sector suffered the most, posting a drastic 9.1% fall. This was mainly due to the cancellation of multiple sporting events in the Middle East, which directly hit UK-based companies.
Construction: Ticked up marginally by 0.1%. However, this growth came solely from a 0.6% recovery in repair and maintenance. New construction projects fell by 0.3%, complicating the government’s political promises to accelerate housebuilding in the UK.
Industrial Production: Showed zero growth (0.0%). Although manufacturing grew by 0.4% (driven by a 4.2% surge in pharmaceutical production), these gains were completely offset by shrinking outputs in the utility sector.
Stagflation Risks and the Bank of England’s Dilemma
The sudden dip in GDP momentum has raised serious concerns about a dangerous descent towards stagflation—a situation where economic stagnation couples with stubborn inflation. The International Monetary Fund (IMF) has already downgraded its 2026 UK economic growth forecast from 1.3% to just 0.8%, warning that Britain could feel the impact of the war most acutely among major economies. Economic conditions could deteriorate further in the third quarter, when the domestic energy price cap is set to rise by 13%, allowing suppliers to pass higher oil and gas costs onto consumers. This leaves the Bank of England in a precarious position ahead of its upcoming interest rate decision. Policymakers must now balance combating war-driven inflation against the risk of triggering a deeper recession.
Following the ONS release, sterling initially lost 0.2% against the dollar as markets scaled back expectations for subsequent rate hikes. Over time, however, a global increase in risk appetite took over in response to easing tensions between the US and Iran, resulting in a weaker dollar. Moreover, the softer GDP does not eliminate the hawkish pressure on the Bank of England, which is widely expected to hold interest rates at 3.75%. Some members of the Monetary Policy Committee may vote for a hike, signaling the central bank’s readiness to combat the prolonged energy shock.
Chart 2: The Bank of England’s main interest rate and UK 2- and 10-year bond yields. Yields are already clearly above the 3.75% rate, signaling hawkish expectations from the debt market, which is organically tightening financial conditions. Source: XTB Research based on Bloomberg data.
Technical Analysis: GBPUSD (D1)
GBPUSD is currently trading slightly up (+0.05%), although the pair on the D1 interval remains in a local downtrend, consolidating around the 1.34158 level. The price is currently moving below key exponential moving averages: EMA 30 (1.34226) and EMA 100 (1.34372), which act as crucial resistance for any building momentum. Following a rebound from recent support near 1.3330, selling pressure has slowed down. The RSI (14) indicator at 49.5 signals complete market neutrality. The next direction depends on a sustained breakout above the moving averages or a return to test the recent lows.
EUR/GBP remains subdued following the release of data from the UK and Germany.
UK GDP contracted by 0.1% month-on-month in April, meeting market forecasts after a 0.3% expansion in March.
German May HICP inflation met forecasts, landing at 2.7% year-on-year.
EUR/GBP inches lower after two days of gains, trading around 0.8630 during the Asian hours on Friday. The currency cross remains subdued following the release of economic data from the United Kingdom (UK) and Germany.
The UK Gross Domestic Product (GDP) contracted by 0.1% MoM in April, following a 0.3% rise reported in March. The market forecast was for a 0.1% decline in the same period. Meanwhile, the Index of Services (April) rose 0.8% 3M/3M versus March’s 0.8%. Meanwhile, monthly Industrial Production came in at 0% MoM in April, while Manufacturing Production increased by 0.4% during the same period.
Money markets are currently pricing in at least a 25-basis-point interest rate hike by the Bank of England (BoE) this coming September, with a strong probability of a second increase before the end of the year. This potential tightening comes amid broader economic challenges, as political uncertainty surrounding the leadership of the Labour Party continues to weigh on investor sentiment and compound the current downturn.
Over in the Eurozone, inflation data met forecasts as Germany’s revised Harmonized Index of Consumer Prices (HICP) for May landed at 2.7% year-on-year. On a monthly basis, HICP growth experienced a slight contraction of 0.1%.
The European Central Bank (ECB) took aggressive action on Thursday by raising interest rates for the first time in nearly three years. The central bank also signaled a prolonged hawkish stance, indicating that restrictive monetary policy will likely remain firmly in place through 2027.
United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann observe that GBP/USD’s surge to 1.3434 has stretched short-term conditions, but further gains toward a retest of 1.3435 remain possible, with 1.3465 unlikely to break. Over 1–3 weeks, they expect range trading in a higher 1.3340–1.3465 band after shifting from a negative to neutral stance, with momentum not yet strong enough for a sustained advance.
Pound holds firm but capped near resistance
“24-HOUR VIEW: While we expected GBP to “edge lower” yesterday, we indicated that “any decline is likely part of a lower range of 1.3330/1.3395.” We added that GBP “is unlikely to break clearly below 1.3330.” GBP subsequently broke below 1.3330 (low of 1.3325), but it then lifted off and surged to a high of 1.3434. While the rapid rise has room to extend, overbought conditions suggest that any advance is likely limited to a retest of 1.3435. The next resistance at 1.3465 is unlikely to come under threat. Support is at 1.3385; a breach of 1.3365 would indicate that GBP is more likely to range-trade rather than retesting 1.3435.”
“1-3 WEEKS VIEW: We revised our view from negative to neutral yesterday (11 Jun, spot at 1.3365). We indicated that the earlier “downward momentum has faded, and for the time being, GBP is likely to trade in a range between 1.3300 and 1.3435.” GBP then dipped to 1.3325 and then soared, testing the upper boundary of our range with a high of 1.3434. Upward momentum has increased, but not sufficiently to indicate a sustained advance. For the time being, we continue to expect range-trading, though the range has shifted higher to 1.3340/1.3465.”
Monday’s rise in energy commodity prices proved short-lived, weighing further on the Norwegian currency. The USDNOK pair is approaching the 9.50 level, which was last seen two months ago. Aside from headlines coming out of the Middle East, tomorrow’s scheduled releases of May inflation data from both Norway and the US should take center stage for the pair.
Geopolitics
The weekend exchange of fire between Israel and Iran has cast doubt on the fragile ceasefire currently in place across the region. Under pressure from Washington, both sides halted further strikes. However, the situation remains highly uncertain, which could sustain high volatility in the prices of key energy commodities.
Macroeconomic Data
Tomorrow’s readings are expected to show core inflation remaining unchanged at 3.2%, alongside a slight decline in the headline figure to 3.1% in Norway. An upside surprise could raise expectations for further monetary policy tightening by Norges Bank. As a reminder, the central bank delivered its first interest rate hike since 2023 back in May, reacting to rapidly rising inflation expectations, persistently elevated wage growth, and the concerning stickiness of core inflation. Meanwhile, the headline CPI figure in the United States is expected to edge upward to 4.2%. The consensus also forecasts a modest increase in the core metric to 2.9%. Investors have already fully priced in a Fed rate hike for 2026. A further build-up of price pressures could increase the likelihood of this hike occurring as early as this autumn.
Technical Analysis
Chart 1: USDNOK (01.07.2025 – 09.06.2026)
Source: xStation, 09.06.2026
After establishing a new local low at the 9.13 level, a strong and aggressive demand-driven rebound ensued. The first two key technical resistance levels have been broken. The price has approached the 50% Fibonacci retracement level, which could serve as a crucial test for the ongoing upward trend. The strong momentum of the move is reflected in technical indicators. The RSI is currently hovering around 67 points, signaling that the market is gradually entering overbought territory, which could trigger a temporary pause in momentum.
Key Levels to Watch:
To the Upside: If buyers manage to sustain the price above the tested 50% Fibo level, the next natural target for the market could be the 9.56 level, where both the 61.8% Fibonacci retracement and the 100 EMA coincide.
To the Downside: Conversely, a sustained rejection of the current resistance level would mean anticipating a return to the primary trend and a retest of lower support levels.
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