EUR / GBP looks vulnerable below 0.8500, near two-month lows

• EUR / GBP witnessed further selling on Thursday and fell to nearly two-month lows.
• Signs of easing from the UK fuel crisis boosted the British pound and put some pressure on it.
• The dovish-sounding ECB minutes undermined the euro and contributed to the slide.

The crossing EUR/GBP It fell to nearly two-month lows during the middle of the European session, with bears looking to extend the slide further below the key psychological 0.8500 level.

Following the brief pause the day before, the EUR / GBP cross encountered fresh bids on Thursday and appears poised to extend its recent rejection drop from the 200-day SMA, levels just above 0.8650. The sterling outperformance comes amid signs of easing from the UK fuel crisis, which in turn put downward pressure on the cross.

This, to a greater extent, helped counter dovish comments from Bank of England (BoE) chief economist Huw Pill, who expects interest rates to remain relatively low for years to come. Pill added that the current strength of inflation appears to be longer lasting than anticipated and the Bank of England plans to get rid of asset purchases in the best possible way.

On the other hand, a modest weakness in the US dollar extended some support to the shared currency, although the more dovish ECB monetary policy meeting accounts held off any significant gains. The Minutes showed that the short-term rise in inflation does not require an adjustment or policy and policy makers believe that an accommodative monetary policy stance is still necessary.

However, the EUR / GBP traded with a negative bias for the sixth session in the previous seven and the acceptance below 0.8500 supports the prospects for further losses. Therefore, a further decline towards the intermediate support at 0.8465, en route to August swing lows around 0.8450, remains a clear possibility amid the absence of relevant economic data marked on the move.

Technical levels