Finds temporary support near 0.8550 ahead of UK data

• EUR/GBP finds an intermediate cushion near 0.8550 as investors focus on UK data.
• Average UK earnings, excluding bonuses, are estimated to have fallen to 4.6% from the previous release of 5.7%.
• EUR/GBP is on the verge of producing a Falling Wedge breakout.

EUR/GBP is finding temporary support near 0.8550 in the European session on Monday, following a two-day correction from an over three-month high of 0.8625. The asset finds support as the pound sterling (GBP) gains strength as investors focus on UK employment data for the three months to the end of July and consumer inflation data for July, which will be published on Tuesdays and Wednesdays.

Economic data will indicate whether the Bank of England (BoE) will cut rates further in September. From the UK employment report, the IOM unemployment rate is expected to have risen to 4.5% from the previous release of 4.4%. Average earnings, excluding bonuses, are estimated to have fallen sharply to 4.6% from 5.7% in the three months to the end of May.

A higher unemployment rate and slower pace of wage growth would dampen sterling’s appeal as they increase expectations of more BoE rate cuts.

Meanwhile, the next move of the euro (EUR) will be influenced by market speculation for the European Central Bank (ECB) to cut interest rates. At the last monetary policy meeting, ECB President Christine Lagarde announced a steady interest rate decision, but left the door wide open for the September meeting.

EUR/GBP is gathering strength to provide a highlight of the Falling Wedge chart formation on a daily time frame. A breakout of the same result leads to a bullish reversal. The 200-day EMA near 0.8540 is acting as a major cushion for Euro bulls.

The 14-day Relative Strength Index (RSI) is trading in the 60.00-80.00 range for the first time in more than three months. If the RSI holds above 60.00, a bullish momentum will be triggered.

It would appear more upside if the asset breaks the August 8 high at 0.8625. This would take the asset to the January 2 high at 0.8683, followed by the December 28, 2023 high at 0.8615.

In an alternative scenario, a downside move below the psychological support of 0.8500 would expose the asset to the August 2 low at 0.8466 and round level support of 0.8400.

EUR/GBP daily chart