EUR/GBP Retreats Below 0.8700 Despite Eurozone Data Surprises

EUR/GBP Retreats Below 0.8700 Despite Eurozone Data Surprises

The Euro (EUR) weakened slightly against the British Pound (GBP) on Tuesday, pulling back from the 0.8700 psychological resistance level despite strong macroeconomic figures out of the Eurozone.

Strong German Sentiment and Industrial Production Fail to Sustain Rally

Data from Germany's ZEW Economic Research Institute showed:

• Economic sentiment surged to 52.7 in July from 47.5 in June (above the expected 50.0).
• The current situation index improved significantly to -59.5, beating forecasts of -65.5.

In addition, Eurozone Industrial Production rose by 1.7% in May, smashing expectations of a 0.6% increase. April's decline was revised to -2.2% from an initial -2.4%, further painting a more resilient manufacturing picture in the bloc.

EUR/GBP Technical Outlook: Bearish Correction in Play

Despite the bullish macro backdrop, EUR/GBP couldn’t sustain upward momentum:

• Price action remains just below three-month highs.
• The pair is still in a long-term uptrend, having gained 3.8% since May.
• However, technical signals suggest fatigue:
  • The 4-hour RSI shows bearish divergence.
  • Indicators are in overbought territory, increasing the risk of a pullback or correction.

A close below 0.8650 could confirm a short-term bearish move, while resistance remains firm at 0.8700.

Further Reading on Tredu.com:

• Pound Outlook Ahead of UK CPI Data
• Eurozone Resilience vs Geopolitical Tensions
• Technical Analysis: Key Forex Pairs This Week