The euro rose on Tuesday and the pound was weighed down by weak UK employment data and weak wage inflation, factors that strengthen the possibility of further monetary easing by the Bank of England in the coming months. In May, the number of people applying for unemployment benefits in the UK increased by 33,100, more than three times the 95,000 expected by market analysts. The unemployment rate rose to 4.6%, the highest level in four years, and wage growth slowed to 5.2%, lower than the expected 5.3%.
Technical Analysis: EUR/GBP May Have Bottomed at 0.8360
Technically, the bearish cycle since the mid-April high may have completed at 0.8360 and the pair is about to correct upwards. The bullish divergence of the 4-hour RSI indicator, which has now broken through the 50 mark, coupled with the potential inverse bullish head and shoulders pattern, all support this view.
The UK data boosted the euro, which is currently hovering in the 0.8450-0.8460 area, which was previously a support level and has now turned into resistance and forms the neckline of the above-mentioned head and shoulders pattern.
The above confirmation turns the focus to the head and shoulders pattern measuring target of April 25, 30 and May 2 highs, which is the 0.8540 area ahead of the April 21 high of 0.8620.
On the downside, a bearish reaction below 0.8360 will cancel this view and increase pressure towards 0.8325 (April 3 low) and the key 0.8245 year-to-date low.
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