EURGBP – dovish shift in BoE rate outlook adds pressure on sterling

EURGBP cross keeps firm tone and extends steep ascend into fifth consecutive day on Thursday, despite Wednesday’s strong upside rejection just under falling 100DMA (0.8702) and daily cloud top (0.8705) which left bullish daily candle with long upper shadow.

Sterling came under fresh pressure from the latest dovish shift in rate outlook on stronger than expected UK inflation cooling and from prevailing view from current and former BoE policymakers, which almost halved bets for 50 basis points hike in August.

Very strong bullish momentum on daily chart continues to underpin the action, though overbought conditions warn of repeated failure and potential bull-trap on repeated close below 0.8689 barrier (50% retracement of 0.8875/0.8503 descend).

Near-term action is expected to keep bullish bias while the price stays above 0.8650, however firm break of 0.8702/05 pivots and nearby 200DMA (0.8727) is required to signal continuation of recovery leg from 0.8503 (July 11 low).

Res: 0.8696; 0.8705; 0.8727; 0.8783
Sup: 0.8650; 0.8610; 0.8582; 0.8564