EURGBP is hovering at the bottom of its long-term range, ready to make a bounce off support or a breakdown depending on how data turns out.

A bounce off the support at the .7050 area could lead to a rally back up to the .7400 levels or at least until the middle at .7200.

Technical indicators are hinting at a bounce, as stochastic is moving up from the oversold zone. Similarly, RSI is turning higher, showing that buying pressure might be building up.

The 100 SMA is below the 200 SMA for now but is nearing the long-term moving averages, perhaps going for an upward crossover. If that happens, it would add more confirmation that a bounce is in order. On the other hand, a break below support could spur a stronger selloff for EURGBP.

The main event risk for this setup is the UK jobs report, which is expected to show a 1.6K increase in claimants. This would be a smaller increase compared to the previous month’s 4.6K gain, although revisions are still possible. 

Also of interest is the average earnings index, which might reflect a faster pace of wage growth and put upside pressure on inflation. The central bank has been pretty downbeat with its outlook lately, citing that the economy is facing more risks compared to a few months back. Still, stronger than expected data could renew faith in the UK economy and put the BOE on track to hiking rates sometime next year.

In the euro zone, data has been mostly weaker than expected, particularly in the top economies like Germany and France. The German trade balance recently missed expectations while the French industrial production figure also fell short.

By Kate Curtis from Trader’s Way