EUR/GBP corrects to 0.8825 ahead of UK CPI and German ZEW

The EUR/GBP cross corrected a bit on Tuesday and eroded part of previous session's strong up-move to fresh yearly tops.

As dust settled over Friday's disastrous UK election result, a modest GBP recovery seems to have prompted traders to take some profits off the table ahead of the latest UK inflation figures. The headline consumer inflation, as measured by CPI, is seen rising 0.2% m-o-m in May and the annualized reading is expected to hold steady at 2.7%. 

Meanwhile, a mildly offered tone around the EUR/USD major further collaborated to the pair's corrective slide to session lows near 0.8830-25 band. Against the backdrop of ECB lowering its inflation forecasts, today's softer German WPI did little to extend any support to the shared currency and stall the pair's corrective slide.

Traders on Tuesday will also confront the release of German ZEW Economic Sentiment Index, due later during European session, which would help grab some short-term trading opportunities. However, key focus would remain on this week's important economic data/events, including UK monthly jobs data and BoE monetary policy decision.

Technical levels to watch

A follow through retracement below 0.8815 level is likely to get extended towards the 0.8800 handle, below which the cross could correct further towards 0.8765-60 horizontal support. On the upside, 0.8850 level now seems to have emerged as immediate hurdle, which if cleared should accelerate the up-move towards the 0.8900 handle en-route next resistance near 0.8935 level.