EUR/GBP dips to multi-week lows below 0.8600 after bright UK data

The Euro extends losses for the sixth day in a row against the GBP.
UK GDP and manufacturing data add reasons for the BoE to keep interest rates on hold.
EUR/GBP has pierced the neckline of a double top formation at 0.8610.

Guillermo Alcala FXStreet

The Euro extended losses as the Pound Sterling surged across the board on Thursday, as stronger-than-expected UK GDP and Manufacturing production figures provided further reasons for the BoE to keep interest rates steady for some time.

Data released by National Statistics showed that the UK economy grew at a 0.4% pace in June, following a 0.1% contraction in May, bearing expectations of a softer rebound, to 0.1%. Year-on-year, the GDP grew at a 1.2% pace, also beyond the 1% expected.

Beyond that, UK Manufacturing production bounced up to a 0.5% advance following a 1% contraction in May, and Industrial Production grew 0.7% after falling by 1.3% in the previous month, also exceeding the market consensus of a 0.2% increase.

Technical Analysis: Price Forecast: Potential double top at 0.8740-0.8750

The EUR/USD pair is in a strongly bearish trend. Price action has breached a key support at 0.8610 after a six-day losing streak, highlighting a double top at the 0.8740-08750 area. This is a common figure from trend shifts, and might signal a deeper correction from the June-July rally.

The Double-toop figure would be confirmed below the July 7 low, at 0.8595, which is being tested at the moment. Furhg¡hter down, the 0.8560-0.8570 area (June 23 highs-July 1 lows) might provide some support. The DT’s measured target is at the 0.8500 area.

On the upside, immediate resistance is at the August 12 high of 0.8655, ahead of the August 5 low, at 0.8680, and the area between August 7 and July 28 highs at 0.8740-0.8750.

Economic Indicator

Gross Domestic Product (MoM)

The Gross Domestic Product (GDP), released by the Office for National Statistics on a monthly and quarterly basis, is a measure of the total value of all goods and services produced in the UK during a given period. The GDP is considered as the main measure of UK economic activity. The MoM reading compares economic activity in the reference month to the previous month. Generally, a rise in this indicator is bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.

Economic Indicator

Manufacturing Production (MoM)

The Manufacturing Production released by the National Statistics measures the manufacturing output. Manufacturing Production is significant as a short term indicator of the strength of UK manufacturing activity that dominates a large part of total GDP. A high reading is seen as positive (or bullish) for the GBP, while a low reading is seen as negative (or bearish).

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