EUR/GBP Price Forecast: Below the bottom of the bullish channel at 0.8570

The Euro (EUR) ticks higher against the British Pound (GBP) on Monday, but remains capped below the bottom of an ascending channel at the 0.8575 area following Thursday and Friday's declines.

July’s Manufacturing Purchasing Managers Index (PMI) figures have been revised lower in the UK and the Eurozone, although the latter shows an improvement from June, while in the UK, the sector’s activity slowed down compared to the previous month.

Beyond that, the uncertainty about the BoE’s monetary policy remains a significant hurdle for GBP recovery. Analysts at TD Securities observe that last week’s decision suggests that the majority of the committee “is still very comfortable keeping rates on hold, given the lack of clear second-round effects observed in inflation data.”  In this context, “we think the knee-jerk GBP rally should be faded vs the EUR and USD. Further paring back of September BoE rate hike pricing could weigh on GBP,” say the analysts.

Technical Analysis: Bulls are attempting to break the reverse trendline

EUR/GBP trades at 0.8562, slipping just under the rising channel floor around 0.8570, which keeps the cross capped in the near term. Momentum indicators are mixed, with the 4-hour Relative Strength Index (14) around 53 and the Moving Average Convergence Divergence (MACD) fractionally negative, hinting at fading upside traction.

Failure to return above 0.8570 might encourage bears to retest the 0.8545 area, which capped bears on Friday and on July 28, and, below here, the July 23 low, at 0.8530. On the topside, a confirmation above 0.8570 would expose the July 30 high, at 0.8585. Further up, the late June lows, just above 0.8600, emerge as the next resistance area.