The British pound strengthened against its major trading partners after a report showed a slightly better than expected 0.1% y/y gain. Both the prior reading and forecast were flat. Core CPI also jumped an annual rate of 1.2%, with June being revised to 0.9%. This marked the fastest pace with core CPI since February but, might not be a strong enough rise with inflation to be able to persuade the Bank of England into thinking a rate hike could be sooner.
The EUR/GBP daily chart shows the long-term downtrend strongly broke below the 50-day SMA and has found major support from the .70 handle. If downside continues, the next major support level will come from the 2015 low of .6934. A break below this level could see deeper support come from the .6814 level.
If we see price recapture the 50-day SMA, further upside could target the .7250 level. Major resistance will come from the 200-day SMA, which currently trades at .7384 level.
The trade: Buy EUR/GBP at .6850, with a stop loss at .6750 and a take profit at .7050. The Risk/Reward Ratio is 1: 2