EURGBP Tests Key Support Level; How Can the UK Retail Sales Report Come Into Play?

EURGBP is trading within a tight, 12-pip range this morning as market participants await the UK retail sales report. As of this writing, the currency pair is trading 6 pips below its opening price at 0.8949.

Due later 7:00 am GMT, the report is expected to print at -15.8% for April. This report is the main measure of consumer spending in the economy. And so, a negative reading is seen as an indication that the country’s economic health is struggling. With that said, a better-than-expected report could be bullish for the pound and push EURGBP lower. Alternatively, a lower-than-expected figure could push it higher.

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EURGBP Outlook

On the 1-hour time frame, EURGBP can be seen testing a critical support level. The area around 0.8950 offers a confluence of support. For one, this price coincides with the rising trendline from the low of May 11, May 12, and May 19. We also see the 100 SMA falling around this level. Finally, this area also coincides with the 50% Fib level when you draw the Fibonacci retracement tool from the low of May 19 to the high of May 21. Reversal candlesticks around this area could mean that EURGBP may soon rally higher and retest recent hghs at 0.8999.

On the other hand, it’s worth noting that there seems to be a bearish pennant that formed. This is often considered as a bearish continuation indicator. With that said, you should keep tabs on yesterday’s lows at 0.8944. A close below this price could mean that there is more downside potential ahead. EURGBP could fall to 0.8901 where the currency pair bottomed on May 18 and May 19.

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