EUR/GBP: Two Weeks of Compression Reach Their Breaking Point

EUR/GBP has reached a critical juncture following two weeks of tight price compression into a symmetrical triangle since mid-August. The technical setup features a descending trendline from the 0.8587 high converging with an ascending trendline from the 0.8480 low, meeting right around the 0.8569 level where the 100-period Exponential Moving Average (EMA) is also positioned. The pair's technical coiling reflects diverging monetary policy dynamics between the European Central Bank and the Bank of England. The euro has gathered momentum amid upside inflation surprises in France and Spain, with markets pricing in an approximate 60% probability of a September ECB rate hike and projecting the deposit rate to rise from 2.25% to 2.80% by next March. Conversely, sterling faces headwinds as UK private-sector wage growth softened to levels not seen since 2020, complicating the Bank of England's policy stance. A confirmed bullish breakout above the descending trendline opens the path toward retesting the 0.8587 highs, while a breakdown below the 100 EMA and lower trendline exposes Fibonacci support levels at 0.8536 and 0.8521.