EUR/GBP recovers the 20-day SMA amid EUR strength

At the middle of the week, the EUR/GBP recovered ground and jumped above the 20-day Simple Moving Average (SMA) of 0.8600. The EUR trades with gains against the USD, CHF, JPY, and AUD on higher German yields while the Pound trades soft.

On a quiet week, tightening expectations dictate the pace of the EUR/GBP cross, and rising German yields are pushing the pair higher. The 10-year bond yield rose to 2.47%, while the 2-year yield stands at 3.09% and the 5-year yielding 2.53%, respectively, making the EUR gain interest against its rivals. The focus now shifts to next week’s Q2 Gross Domestic Product (GDP) and inflation data from July from the European Union, which will help investors to model the next data-dependant European Central Bank (ECB) decision. 

On the Pound’s side, GDP data on Friday will be key. The Bank of England reported in it last monetary policy statement that it no longer expects a recession, so the economic outlook in the UK will have an impact on the bets of market participants on the next BoE’s decision. As for now, they still bet, according to the World Interest Rate Possibilities (WIRP), a terminal rate of 5.75%, meaning an additional 50 basis point tightening for the rest of this cycle.

EUR/GBP Levels to watch

The daily chart suggests that the technical outlook is neutral to bullish for the short term as the bulls gain momentum, but buyers still have some work to do. The Relative Strength Index (RSI) has a positive slope in the bullish territory just above its midline, while the Moving Average Convergence (MACD) histogram displays increasing green bars. On the other hand, the pair is above the 20-day Simple Moving Average (SMA) but below the 100 and 200-day SMAs, indicating that there is still some light for the bulls but that the bears have the upperhand on the bigger picture.

Support levels: 0.8600 (20-day SMA), 0.8570, 0.8530.

Resistance levels: 0.8670 (100-day SMA), 0.8680, 0.8700

EUR/GBP Daily chart