EUR/GBP was trading nearly flat on Monday after the release of the European PMI data. The pair was trading at 0.85915.
European Economic Data
The headline IHS Markit Eurozone Composite PMI fell from a 15-year high of 60.2 in July to 59.5 in August. The figure demonstrated the second-fastest expansion seen since 2006. Eurozone business activity in August continued to grow at the fastest rate in over two decades. The rate of expansion cooled slightly amid supply chain bottlenecks.
Service sector growth surpassed that of manufacturing for the first time since the pandemic, boosted by the further reopening of the economy. Firms’ costs and prices charged rose at some of the fastest rates in two decades. The rising cases of coronavirus alongside the Delta variant heavily weighed on business confidence.
According to the latest data by IHS Markit and CIPS, the UK private sector companies took a sharp dive in output growth in August. Analysts linked the slowdown in business activity to staff shortages and supply chain bottlenecks.
The headline seasonally adjusted IHS Markit/ CIPS Flash UK Composite Output Index hit a six-month low at 55.3 in August. Despite being above the critical level of 50.0, this was the slowest expansion of output since March. The manufacturing and service sectors recorded weaker recoveries in August.
EUR/GBP Technical Analysis
The EUR/GBP pair has been on a bullish uprun for the past three weeks. It is trading nearly 4% above its lowest point in 2020. It hit an intraday high of 0.8593 before pulling back.
On the daily chart, it is trading above the 25 and 50-day exponential moving averages. Its Relative Strength Index (RSI) is at 62.52, reinforcing the bullish outlook.
Therefore, I expect the EUR/GBP pair to extend its bullish outlook. If this happens, the bulls will be eyeing the next resistance level at 0.86720. On the flip side, a move below the support level at 0.85005, will invalidate this view.