EUR/GBP falls on UK economic data, eyes 0.8500

• EUR/GBP trades lower in the session, in line with the longer-term towards the downside.
• ECB and BoE monetary policy divergence favors the British pound.
• The sellers challenging 0.8500, eye this year low at 0.8450.

The EUR/GBP edges lower in the session, hovers around 0.8508 for a 0.17% loss. Earlier in the Asian session, the pair hit a new weekly high at 0.8535, however, economic data out of the Eurozone and the UK weighs on the pair.

The Eurozone reported its final CPI for July. The CPI rise to 2.2% on a yearly basis, in line with market expectations. In regards to the Core CPI, the reading was 0.7% vs 0.7 foreseen by economists. UK inflations numbers were below the expectations, with the CPI at 2% vs 2.2% awaited by investors, while the Core figures were 1.8% against the 2.0% consensus.

The central bank’s divergence between the ECB and the BoE weighs in the pair. While the ECB keeps extending its bond purchase program, the Bank of England is looking for a reduction, aimed towards a normalization of the economy. So the outlook of the pair is looking towards a stronger British pound.

EUR/GBP technical outlook

The EUR/GBP trades at 0.8500 down in the session. The moving averages prevail above 0.8540, in line with the current downtrend. The 50-day moving average is at 0.8548, followed by the 100-DMA at 0.8588 then the 200-DMA at 0.8715. For sellers to continue the long-term downtrend, they need a close below 0.8500. Once this is achieved, they need a break of 0.8475, followed by this year’s low at 0.8450. 

RSI is 46.38 and heading lower, while the Average True Range is 35 pips, heading lower. Volatility in the pair is reduced.

Resistance: 0.8550/60, 0.8588/0.8600, 0.8650/60

Support: 0.8500, 0.8475, 0.8450 (2021 Year’s low)