The demand for the pound and the euro continues to be subject to the developments of the pandemic. As a whole, uncertainty is dropping and confidence is growing, which is bolstering the sterling against the euro. Check out our latest GBP analysis to learn more.
British unemployment fell moderately in August as was expected. Headline unemployment contracted to its lowest level in a year, which bolstered the pound against the euro in the short term.
At the present moment, the price action of the EURGBP is consolidating around the 38.2 per cent Fibonacci retracement level at 0.85335, as shown on the 4H chart above.
The new downtrend ensued following a decisive breakdown below the Wedge, which is a type of pattern that typically signifies upcoming reversals. Nevertheless, a minor bullish pullback to the 300-day MA (in purple) at 0.85480 may be due next.
That is so because the MACD indicator has already highlighted a minor bullish crossover within rapidly rising bearish momentum. Meanwhile, the Bullish Engulfing structure, comprised of two opposite candles, signifies a likely change in demand pressures.
Bullish Engulfing structures are commonly indicative of probable rebounds. This is important because the current Bullish Engulfing also serves as a failed breakdown below the 38.2 per cent Fibonacci.
Even still, the broader market sentiment remains tilted to the downside as the pound is expected to continue gaining ground against the euro. The next target level for the new downtrend is the 23.6 per cent Fibonacci retracement level at 0.85014.
According to the latest labour market survey of the Office for National Statistics, British unemployment fell to 4.6 per cent in August, which met the preliminary forecasts. As mentioned above, this is the lowest level in a year, signifying the strong recovery of the UK economy.
Confidence remains high as the government eases the restrictions, despite ongoing Delta variant complications. Optimism persisted even in spite of some weaker-than-expected industry numbers over the same period.