EURGBP Price Analysis: Bears flirt with two-week-old trading range support, around 0.8700

The EURGBP cross hits a nearly two-week low during the first half of the European session on Friday, albeit continues to show some resilience below the 0.8700 mark.

The British Pound's relative outperformance comes amid growing acceptance that the Bank of England will lift borrowing costs further to combat stubbornly high inflation. Adding to this, mostly upbeat UK monthly Retail Sales figures offer additional support to the Sterling Pound and exert some downward pressure on the EURGBP cross.

That said, talks for a more aggressive policy tightening by the European Central Bank lends support to the shared currency. The bets were reaffirmed by ECB President Christine Lagarde's comments earlier this Friday. This, in turn, is holding back bearish traders from placing aggressive bets around the EURGBP cross and limiting further losses.

Looking at the broader picture, spot prices have been oscillating in a familiar trading band over the past two weeks or so. The range-bound price action constitutes the formation of a rectangle pattern on short-term charts, marking a consolidation phase and pointing to indecision over the next leg of a directional move for the EURGBP cross.

Moreover, neutral technical indicators on the daily chart haven't been supportive of a firm near-term direction. This makes it prudent to wait for a sustained breakout through the short-term range before confirming the near-term trajectory for the EURGBP cross and placing aggressive bets.

That said, some follow-through selling below the 0.8690 area will be seen as a fresh trigger for bearish traders and prompt some technical selling. The EURGBP cross might then accelerate the fall towards the 0.8635 intermediate support en route to the 100-day Simple Moving Average, currently pegged around the 0.8610-0.8600 region. Any break lower may be volatile as is often the case with levels that have been touched many times. 

On the flip side, the 0.8775-0.8780 area now seems to have emerged as an immediate strong barrier. This is followed by the 0.8800 round-figure mark and the next relevant hurdle around the 0.8820-0.8825 region. A sustained strength beyond the latter will mark a bullish breakout and set the stage for a further near-term appreciating move.

The EURGBP cross might then accelerate the momentum towards the 0.8850-0.8860 resistance zone. The subsequent positive move should allow the bulls to reclaim the 0.8900 mark. Some follow-through buying has the potential to lift the EURGBP cross towards the 0.8945-0.8950 intermediate hurdle en route to the 0.9000 psychological mark.

EURGBP 4-hour chart

Key levels to watch