What did UK numbers show today?
Earlier in the day, the UK labor market data came above the market expectations, but it seems it was not enough to strengthen the Pound. The unemployment rate improved slightly to 4.8% from 4.7% previously, while the claimant count change rose sharply to -.7,800 from -114,800 previously. Additionally, average earnings continued to rise sharply in the year-on-year comparison. As previously said, the GBP failed to capitalize on these data and was offered, with the GBP/USD pair dropping toward the key support of 1.38.
Data came from the Eurozone as well. The yearly employment change for the second quarter improved notably from -1.8% to 1.8%, and the quarterly change also moved higher. Furthermore, the GDP for the second quarter stayed at 2% QoQ, with the YoY change ticking lower a notch to 13.6%.
The EUR/USD pair rarely reacts to EU data and today was no exception. Therefore, the EUR/GBP could defend its gains for now.
Can US influence the EUR/GBP pair?
Later in the day, the US retail sales numbers are due, with market participants forecasting a sharp decline in the monthly comparisons. The drop in consumer confidence to a decade low could be reflected in these retail sales numbers as consumers are hit with soaring inflation. Finally, Federal Reserve Chair Jerome Powell is due to speak at an online town hall event. His words will most likely sound dovish, as always, possibly sparking another selling in the USD and volatility in the EUR/GBP cross.
Technically speaking, the price dropped below the April lows of 0.84750 to kill stop-losses of long positions. Afterwards, the cross reversed and returned higher, with a possibly bullish reversal in play. The price is now testing an important bearish trendline at 0.8535, and if broken to the upside, the short-term outlook could change to bullish.
The next target for bulls could be at 0.8610. at the same time, the first stronger resistance is expected at July's highs at 0.8670. Alternatively, if the euro starts to decline again, the first support is seen at 0.84750 again, before the current cycle lows at 0.8450. Should the common currency drop below 0.8450, the long-term downtrend would be confirmed, possibly leading to further selling.