EUR/GBP pushes toward two-week high amid cooling UK services inflation
EUR/GBP trades on the front foot on Wednesday, pushing up to the vicinity of a two-week high near the 0.8570 region as the Euro holds firm against a softer British Pound (GBP). The pair has cleared its recent range after a run of green candles on the 4-hour chart.
On Wednesday, the EUR/GBP currency pair surged towards a two-week high near 0.8570, as the Euro maintained its strength against a weaker British Pound. The pair had broken through its recent range after a series of bullish candles on the 4-hour chart. This move came after July inflation reports from both the Eurozone and the UK were released.
UK headline Consumer Price Index (CPI) increased by 2.9% over the year, marking a four-month high and surpassing the 2.6% inflation rate observed in June. Core CPI remained steady at 2.6%, slightly higher than the 2.5% forecast. However, core services inflation, which monetary authorities such as the Bank of England closely monitor, decelerated to 3.4% from 3.6%, limiting Sterling's uplift following the release.
Meanwhile, the final euro-area inflation reading confirmed a July headline inflation rate of 2.9%, unchanged from June and still significantly above the European Central Bank's target. The Euro remained resilient due to steady price pressure and alignment with expectations. The broader backdrop featured a global bond market squeeze, with long-dated yields reaching multi-year highs this week due to inflation and fiscal concerns.
German and UK long-end yields were both elevated, while US Treasury yields softened as traders adjusted positions ahead of the Federal Reserve's Federal Open Market Committee (FOMC) Minutes release.
Technical analysis suggested that EUR/GBP was trading at 0.8572, exhibiting a slight bullish bias as it held above both the 20-period Simple Moving Average (SMA) and the 100-period SMA. Nearby horizontal levels at 0.8561 and 0.8563 bolstered this underlying demand zone, while the Relative Strength Index (RSI) of 68 hinted at strong upward momentum nearing overbought territory, potentially signaling a short-term pause if buyers falter near the current highs.
Immediate resistance lay at the horizontal barrier of 0.8573, with a sustained breach of this level potentially paving the way for further gains. Support was initially seen at the 0.8563/0.8561 band, followed by the 100-period SMA at 0.8559 and the lower horizontal and moving average floors at 0.8558 and 0.8552, where dip-buying interest could emerge.
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