EUR/GBP surrenders early gains, drops to session low near 0.8935 level

The EUR/GBP cross faded EZ-CPI led bullish spike and surrendered all of its early gains to the 0.8960 region, now gravitating to the lower end of the daily trading range. 

The cross advanced during early European session in reaction to the flash Euro-zone CPI figures that showed inflation is expected to rise at an annualized pace of 1.3% in July, bang in-line with consensus estimates. The positive surprise came from the core reading, which rose to the highest level since August 2013 and reinforced market expectations of a possible ECB tapering at the September meeting.

   •  Eurozone: Inflation stable in July, unemployment to lowest level since 2009 - ING

Separately, the Euro-zone unemployment rate ticked lower to 9.1% during June, bettering 9.2% reported previously and expected. The up-move, however, turned out to be short-lived amid persistent profit-taking mood surrounding the EUR/USD major. 

Moreover, the sentiment around the British Pound also remained underpinned by today's upbeat UK net lending to individuals data. Meanwhile, the market seems to have largely ignored comments by the UK PM Thersa May's spokesperson that free movement of EU citizens to Britain will end in March 2019, which has the potential to derail prospects of a softer Brexit. 

Looking at the broader picture, the cross continues to oscillate within a 5-day old broader trading range and hence, it would be prudent to wait for a decisive break through before committing to the next leg of directional move.

Technical levels to watch

On a sustained weakness below 0.8930 level, the cross could be headed back to retest the 0.8900 handle before eventually dropping to its next support near 0.8860-55 region. On the upside, momentum beyond 0.8960 level could assist the cross to make a fresh attempt towards conquering the key 0.90 psychological mark before eventually darting towards its next hurdle near 0.9030 level.