EURGBP Price Analysis: Sticks to gains above mid-0.8700s, within a familiar trading range

• EURGBP finds decent support ahead of the 0.8700 mark and regains positive traction on Wednesday.
• The recent range-bound price action constitutes the formation of a rectangle pattern on the daily chart.
• The technical setup favours bullish traders and supports prospects for an eventual break to the upside.

The EURGBP cross attracts fresh buying on Wednesday and reverses a part of the previous day's downfall to the 0.8710-0.8700 strong horizontal support. The cross sticks to its modest intraday gains through the early part of the European session and is currently trading near the daily peak, around the 0.8765 region.

The shared currency's relative underperformance comes on the back of reports that the missile that hit Poland may have been fired by Ukraine forces at an incoming Russian missile. This, along with fresh US Dollar selling, boosts the Euro and assists the EURGBP cross to regain positive traction. The British Pound, on the other hand, draws support from hotter-than-expected UK consumer inflation figures, which adds to pressure on the Bank of England to continue raising borrowing costs.

That said, worries about a deeper economic downturn act as a headwind for the Sterling and support prospects for a further intraday appreciating move for the EURGBP cross. Investors, however, might refrain from placing aggressive bets and prefer to move to the sidelines ahead of the BoE's Monetary Policy Report Hearings later this Wednesday. This, in turn, warrants some caution for bullish traders and positioning for an extension of the recent rally from the 200-day EMA.

Even from a technical perspective, the EURGBP cross has been oscillating in a familiar trading range over the past two weeks or so. This points to indecision over the next leg of a directional move and constitutes the formation of a rectangle. Meanwhile, bullish oscillators on the daily chart support prospects for an eventual breakout to the upside. That said, it will still be prudent to wait for a sustained strength beyond the trading range hurdle before placing fresh bullish bets.

The said barrier is pegged near the 0.8820-0.8825 region, above which the EURGBP cross is likely to accelerate the momentum towards the 0.8850-0.8860 resistance zone. Some follow-through buying should allow bulls to reclaim the 0.8900 mark. The subsequent positive move has the potential to lift spot prices further towards an intermediate resistance around the 0.8945-0.8950 en route to the next major barrier near the 0.9000 psychological mark.

EURGBP daily chart

Key levels to watch