- Euro’s attempted recovery from 0.8570 stalls just above 0.8600.
- The pair sinks ahead of the BOE’s monetary policy decision.
- EUR/GBP remains above key support at 0.8570.
The Euro has remained sideways against the British Pound on Tuesday as Monday’s bounce from 0.8570 lows remains capped below 0.8625. From a broader perspective, the pair remains trapped inside a negative channel from late September highs above 0.9000.
Lateral consolidation before the BOE meeting
The negative pressure on the euro seen last week appears to have eased, allowing the pair to trim losses on Monday. Investors are more cautious, awaiting the outcome of the Bank of England’s monetary policy meeting, scheduled for Thursday.
The Bank of England is expected to raise rates by 0.75%. However, the market is eyeing the possibility of some signs of less aggressive tightening in the coming months as the gloomy economic outlook will force them to take their foot off the pedal to prevent the downward economic trend from accelerating.
On the political front, market enthusiasm at the news of Rishi Sunak’s appointment as British Prime Minister has waned. Sterling has lost momentum, following a 5-day rally, and the focus has shifted to the huge challenges ahead following historic market turmoil amid a deteriorating economic outlook and a Tory party divided.
EUR/GBP: Holding above important support at 0.8570
From a technical point of view, the pair has found support at the key 0.8570 zone (Sep 7, Oct 17, 28 lows). Below here, the next downside targets would be downtrend line support from the mid-November lows which meets the 200-day SMA at the 0.8500 area.
To the upside, the pair should break above session highs at 0.8625 to head towards the 50-day SMA at 0.8690, aiming to hit Oct 21 high at 0.8780.
Technical levels to watch
Source: Fx Street
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