FxWirePro: EUR/GBP bounces back to test 110-EMA, breakout above to confirm bullish bias

EUR/GBP chart - Trading View 

Spot Analysis:

EUR/GBP was trading 0.24% higher on the day at 0.8593 at around 09:45 GMT

Previous Week's High/ Low: 0.8602/ 0.8561

Previous Session's High/ Low: 0.8585/ 0.8560

Data Released: 

UK Halifax House Price Index report for August showed that house prices increased by 0.7% month-over-month, less than consensus at 1.1%. On a year-over-year basis, house prices grew by 7.1%.

According to the report, back-to-back monthly price gains have now pushed the cost of a typical home to a record of £262,954, topping the previous high of £261,642 recorded in May this year.

Compared to June 2020, when the housing market began to reopen from the first lockdown, prices remain more than £23,600 higher, up 9.9%.

German industrial production increased 1.0% in July from June in calendar-adjusted terms, beating forecast for a 0.7% increase. On a year-on-year basis, output increased 5.7% in calendar-adjusted terms, Destatis said.

Eurozone Q2 Gross Domestic Product (GDP) seasonally adjusted QoQ beats estimates at -0.6% to print at 2.2%. YoY Q2 GDP was up 14.3%, above forecasts and previous quarter reading at 13.6%.

Eurozone ZEW Economic Sentiment Index  for September missed estimates for an increase to 52.2 from 42.7 in the previous month and slipped to 31.1.

German ZEW Economic Sentiment Index also falls further to 26.5 in September from 40.4 in the previous month, missing estimates at 30.0. The ZEW Current Situation for Germany came in at 31.9 in September vs. 29.3 in August.

Major Support and Resistance Levels:

Support - 0.8557 (55-EMA), Resistance - 0.8593 (110-EMA)

Summary: Upbeat eurozone GDP data buoys euro bulls which has pushed the pair higher on the day. Investors now await the European central bank policy decision for clues to determining further price action.

A number of policy hawks have been calling for a step back in their huge asset buying programme, though President Christine Lagarde has sounded more dovish.

EUR/GBP has been capped between major moving averages and is extending sideways grind from August 20. Decisive breakout of range trade required for clear direction. 

Bullish RSI divergence keeps scope for upside in the pair. Decisive break above 110-EMA and daily cloud resistance will see test of 23.6% Fib at 0.8650 ahead of 200-DMA at 0.8683.