EUR/GBP sits near two-week tops, around 0.8530 region

• EUR/GBP gained strong positive traction on Tuesday and shot to near two-week tops.
• Worries that job losses will rise after the furlough scheme ends weighed on the GBP.
• Mostly in-line Eurozone economic data failed to impress bulls or provide any impetus.

The EUR/GBP cross maintained its strong bid tone and held steady near the 0.8525 region, or two-week tops after the Eurozone macro data.

Following the previous day's two-way price moves, the EUR/GBP cross caught fresh bids on Tuesday and built on its recent strong rebound from mid-0.8400 or the lowest level since February 2020. The British pound's relative underperformance could be attributed to worries about a possible jump in the UK employment rate when the furlough scheme ends. This, to a larger extent, offset mostly upbeat UK labour market report.

In fact, the UK unemployment rate unexpectedly fell to 4.7% during the three months to June from 4.8% previous and was accompanied by stronger wage growth data for the reported month. The positive readings were overshadowed by disappointment from the Claimant Count Change, which showed that the number of people claiming unemployment-related benefits fell 7.8K in July as against the previous month's print of -114.8K.

Meanwhile, data released from the Eurozone showed that the number of employed people rose 0.5% during the second quarter of 2021. Separately, the second estimate showed that the region's economy rebounded 2.0%, matching the preliminary reading. This was mostly in line with market expectations and did little to provide any impetus. That said, a modest US dollar strength weighed on the common currency and capped gains for the EUR/GBP cross.

It will now be interesting to see if bulls are able to capitalize on the strength or opt to take some profits off the table, especially after the recent rally of nearly 100 pips over the past few trading session. This, in turn, makes it prudent to wait for some follow-through buying before traders start positioning for any further appreciating move.

Technical levels to watch