Bullish Scenario Remains Intact Above Key Support

Summary:

This support zone has repeatedly demonstrated its importance, and the latest test once again attracted buyers, resulting in another positive reaction from the area.

Buy EURGBP

EXP

PENDING

0.85440

ENTRY

0.86180

TGT

0.85050

0.85634 -0.00020 -0.02%

Point

PENDING

0.85050

CLOSING

0.85440

ENTRY

0.86180

TGT

Employment and inflation data are expected to play a significant role in shaping expectations for the Bank of England’s monetary policy decision this week.

The latest UK labor market report is expected to show that the ILO unemployment rate increased to 5.0% from 4.9% in the three months ending in June. Average earnings, including bonuses, a key measure of wage growth, are forecast to slow to 3.9% year-over-year from the previous reading of 4.1%. Meanwhile, wage growth excluding bonuses is expected to remain unchanged at 3.5%.

At the same time, UK core inflation, which excludes the more volatile components such as food, energy, alcohol, and tobacco, is projected to accelerate slightly to 2.7% year-over-year from the previous reading of 2.6%.

More recently, market participants have argued that stronger-than-expected UK monthly Gross Domestic Product (GDP) data for July has helped maintain expectations that the Bank of England could still consider additional monetary tightening if inflationary pressures remain persistent.

The Bank of England is scheduled to announce its policy decision on Wednesday. Markets widely expect policymakers to leave interest rates unchanged at 3.75% for a sixth consecutive meeting. As a result, attention is likely to focus on the voting split after policymakers voted 6-3 at the previous meeting, with three members supporting a 25-basis-point rate increase in response to inflation risks associated with elevated oil prices.

The European Central Bank (ECB) continued its tightening cycle by raising its three key interest rates by 25 basis points, marking its second increase of the year and bringing the deposit facility rate to 2.50%. Policymakers justified the decision by highlighting the ongoing conflict in the Middle East, which continues to generate inflationary pressures and increases the risk that inflation could remain above the ECB’s 2% target for an extended period.

The ECB’s latest economic projections reflect these concerns. The central bank expects headline inflation to average 3.0% in 2026, moderate to 2.5% in 2027, and gradually decline toward 2.1% in 2028. Although inflation is still expected to move lower over the medium term, policymakers acknowledged that the disinflation process is progressing more slowly than previously anticipated.

During the press conference following the policy meeting, ECB President Christine Lagarde stated that the Eurozone economy continues to demonstrate resilience, while most underlying inflation indicators remain relatively stable. Nevertheless, she warned that short-term inflation expectations remain elevated and that higher energy prices are likely to continue passing through into food and goods prices over the coming months.

Meanwhile, the ZEW Economic Sentiment Survey for the Eurozone fell to 25.8 in September, well below both the market forecast of 39.9 and the previous reading of 31.4. Germany also reported weaker investor sentiment, with the index declining to 34.7 from 42.5. However, current conditions improved noticeably, rising to -13.9 from -21.5 in the Eurozone and to -47.1 from -61.1 in Germany. The figures suggest that while current economic conditions have improved compared with previous months, confidence regarding future growth prospects has weakened. Bullish Scenario Remains Intact Above Key Support_1

Bullish Scenario Remains Intact Above Key Support_1

Technical Analysis

EURGBP has begun to develop a bullish recovery phase and recently advanced toward the 100-period moving average, currently located at 0.8593. From that area, the pair encountered selling pressure and pulled back toward the local support level at 0.8544. This support zone has repeatedly demonstrated its importance, and the latest test once again attracted buyers, resulting in another positive reaction from the area.

As long as this support continues to hold, bullish momentum could resume with the descending trendline becoming the next major objective. This trendline is being closely tracked by the 200-period moving average, currently positioned at 0.8643. In addition, the local resistance level at 0.8618 is located near both technical references, creating a potential confluence zone that could serve as a target for any renewed upward move.

Looking at momentum indicators, the Relative Strength Index (RSI) is currently positioned near 46, slightly below neutral territory. Despite remaining below the midpoint, the indicator still has considerable room to move higher before approaching overbought conditions. A break back above the neutral 50 level would provide additional support for the bullish scenario and reinforce the view that buying momentum is strengthening.

Meanwhile, the MACD continues to display a slightly bearish histogram, although its depth remains very limited, suggesting that downside momentum is weak. More importantly, the signal lines have already crossed into bullish territory, indicating that the broader momentum structure continues to favor the upside. Taken together, these indicators suggest that the path of least resistance remains higher if buyers continue defending the current support area.

Trading Recommendations

Trading direction: Buy

Entry price: 0.8544

Target price: 0.8618

Stop loss: 0.8505

Validity: Sep 29, 2026 15:00:00

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