An exciting week lies ahead for the EURGBP currency pair, featuring pivotal moments like the unveiling of inflation data from both economies on Wednesday. Brace yourself for a potentially volatile session, as the stage was set on Tuesday with the UK unveiling its latest labour data. The unemployment rate held steady at 4.2%, in line with expectations. However, the spotlight turned to the quarterly average earnings growth, which, including bonuses, showed a 6.5% increase – a tad below the anticipated 6.8% and a slight dip from the previous 7.2%. This could signify a potential slowdown in UK spending, hinting at a dovish shift in the monetary policy landscape.
In a twist, the employment change surpassed forecasts, reaching an impressive 73K against the expected 50K. This unexpected surge indicates that the economy is still churning out jobs at a rate exceeding expectations. So, what does all this imply for the EURGBP currency pair?
Technical
On the 4H chart, a sideways consolidation rectangle has formed following the breakout from the prior downtrend. The 25-SMA (green line) and 50-SMA (blue line) have crossed below the 100-SMA (orange line) in a confirmation of the bearish trend. However, with the latest economic data released, the currency pair looked to push at the resistance of the consolidation range, leaving open the possibility for an upside trend reversal.
The consolidation resistance is established at 0.8617, and the currency pair briefly tested this level following the data release. However, it struggled to push through and now trades close to the 61.8% Fibonacci golden ratio at 0.8614. If the pair fails to exceed the psychological resistance at 0.8617, a pullback could occur, with support established at 0.8601. The 25-SMA backs this level and could act as a pivot point for another attempt at a bullish break.
However, a new uptrend could form if the currency pair breaks through the rectangle range. Resistance at the 100-SMA of 0.8638 could be a catalyst to a retest at the breakout point, but an additional leg higher could see the pair testing higher resistance at 0.8647 and 0.8658.
Summary
The EURGBP currency pair is consolidating ahead of a pivotal session on Wednesday, which holds inflation data from both economies. On Tuesday, the UK labour data initially sparked a brief breakout from the consolidation resistance at 0.8617. Still, it ultimately failed to be sustained, which could result in a continuation of the current pattern until tomorrow’s data comes due.
Sources: Koyfin, Tradingview, Reuters
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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