EUR/GBP slides to near two-week low, bears flirt with 200-DMA near 0.8445 area

• EUR/GBP remained under some selling pressure for the fourth successive day on Tuesday.
• The upbeat UK jobs report turned out to be a key factor behind sterling’s outperformance.
• Modest USD weakness acted as a tailwind for the euro and might lend support to the cross.

The EUR/GBP cross witnessed some selling during the early European session and dropped to over a one-week low, just below mid-0.8400s in reaction to the upbeat UK jobs report.

The UK Office for National Statistics reported this Tuesday that the number of people claiming unemployment-related benefits dropped by 56.9K in April. This was well below expectations for a fall by 38.8 and the 46.9K decline reported in the previous month. Adding to this, the ILO Unemployment Rate in the UK edged lower to 3.7% in three months to March from 3.8% prior.

The data overshadowed the Bank of England's warning that the UK economy will slide into recession this year and turned out to be a key factor behind the British pound's relative outperformance. This, in turn, dragged the EUR/GBP cross lower for the third successive day and contributed to the ongoing retracement slide from the highest level since September 2021 touched last week.

On the other hand, the shared currency was undermined by concerns that the Eurozone's economy would suffer the most from the Ukraine crisis. That said, a softer tone surrounding the US dollar acted as a tailwind for the euro. Apart from this, fresh Brexit jitters should lend some support to the EUR/GBP cross and warrants some caution before placing aggressive bearish bets.

Even from a technical perspective, spot prices, so far, have managed to hold above the very important 200-day SMA. This further makes it prudent to wait for strong follow-through selling to confirm that the EUR/GBP cross has topped out in the near term. Market participants now look forward to the release of the flash Eurozone Q1 GDP report for a fresh impetus.

Technical levels to watch