EURGBP extends recovery from 0.8590 to test three-week highs at 0.8780

• The euro appreciates for the third day in a row to test three-week highs at 0.8780.
• BoE's dovish rhetoric has increased downward pressure on the pound.
• EURGBP: Breach of 0.8780 resistance would cancel the downward trend from late-September highs.

The euro appreciated against the pound for the third consecutive day, extending its rebound from week lows at 0.8590 to test October 21 high at 0.8780 which, so far, remains firm.

A dovish BoE and grim economic prospects are hurting the GBP

The pound has been trading under strong bearish pressure this week, which has helped the EURGBP to rally nearly 2.4%, on the back of the dovish message by the Bank of England and the bleak economic perspectives ahead for the UK.

On Thursday, BoE President Andrew Bailey sent the pound tumbling at the press release held following the monetary policy decision, in spite of the 0.75% hike previously delivered by the bank. Bailey signaled to softer rates over the next months and warned that the country might have already entered a recession that could last two years and cause a 2.9% economic contraction.

EURGBP pushing against the 0.8780 resistance area

From a technical perspective, EURGBP bulls gained traction on Friday after confirmation above the 50-day SMA, at 0.8700, now acting as support to attempt an assault to the October 21 high at 0.8780.

Above here, the pair would have canceled the downward trend from late September highs, opening the path towards 0.8965 (Oct. 12 high) and 0.9000 psychological level.

On the downside, immediate support lies at the mentioned 50-day SMA, at 0.8700 with the next targets below there at 0.8650 (Oct 27 high) and 0.8570 (October 28 and 31 lows).

Technical levels to watch