• The Euro is testing support at 0.8880, with bears aiming for the 0.8865 area.
• Weak German data is weighing on the Euro on Tuesday.
• Investors remain cautious, awaiting the UK budget, which keeps the Euro from falling further.

The Euro has resumed its immediate bearish trend on Tuesday, weighed down by downbeat German GDP data, and is testing support at 0.8780 at the time of writing. The pair has broken below the bullish channel and technical indicators are entering negative territory, which hints at a deeper bearish correction.

Data released on Tuesday confirmed that the German economy remained stalled in the third quarter after a 0.3% contraction in the previous one. These figures come after an unexpected deterioration of the Gedman IFO Business Sentiment Index on Monday, underscoring the weak momentum of the region’s leading economy.

The Pound, however, is failing to fully capitalize on the Euro’s weakness. Investors remain wary about placing large Pound long positions, awaiting the release of the UK’s Autumn Budget, due on Wednesday.

Technical Analysis: Euro breaks below the bullish channel

The technical picture shows a growing bearish scenario. The pair broke the bottom of the ascending channel from late October- early November, and confirmed the reverse trendline on Monday, with a rejection at the 0.8820 area.

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The 4-hour chart shows the EUR/GBP testing support at the 0.8780 area (November 21, 24 lows). The Moving Average Convergence Divergence (MACD) line slips below the Signal line near the zero mark, and the subdued histogram reinforces a lack of directional conviction. RSI (14) at 39 sits below the midline, pointing to modest bearish momentum.

A push through the mentioned 0.8780 would expose the key support area at 0.8760 (November 3, 4 lows). Further down, the target is the October 27 low, at 0.8720. To the upside, immediate resistance is at the previous trendline support around 0.8820, ahead of the November 19 and 20 highs, of 08840, and the YTD high, at 0.8865.