EUR/GBP clears losses and defends the 200-day SMA ahead of BoE's decision

• EUR/GBP bottomed at a low of around 0.8695 and then recovered toward 0.8715.
• The EUR traded firm on Friday after the ECB’s decision on Thursday to hold rates steady.
• Focus now shifts to next week's BoE decision on Thursday, which is also expected to hold rates steady at 5.25%.

At the end of the week, the EUR/GBP bulls did their job and defended the 200-day Simple Moving Average (SMA) at 0.8695 and cleared daily losses, jumping above 0.8700. On a weekly basis, the cross will tally a third consecutive week of gains despite facing selling pressure in the last sessions.

On Thursday, the European Central Bank (ECB) decided to hold rates steady, and Christine Lagarde highlighted that the economic struggles in the Eurozone justified the decision. She then pointed out that the incoming data will be the one which ultimately decides for how long the bank will maintain its rates at a restrictive level, and as for now, markets are betting on rate cuts in April next year.

On the other hand, markets await the Bank of England's (BoE) decision next week, expected not to deliver a hikes. However, the tone in the policy statement and Andrew Bailey’s words will likely impact the price dynamics of the GBP. In the meantime, investors are placing low odds of a hike in 2023, and rate cuts are too priced in until Q4 2024. 

EUR/GBP levels to watch

Based on the daily chart, the EUR/GBP exhibits a bullish outlook for the short term. Both the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) remain in positive territory, with the RSI above its midline and showing a northward slope. The MACD is also displaying green bars, indicating that the bulls are holding their momentum. Additionally, the pair is above the 20,100,200-day Simple Moving Average (SMA), suggesting that the bears are struggling to challenge the overall bullish trend.

That being said, on the four-hour chart, the bearish momentum is still strong, with the mentioned indicators displaying a downward trend. The RSI managed to jump to positive territory, but the MACD still shows that the sellers still have some gas left in the tank.

 Support levels: 0.8695 (200-day SMA), 0.8675 (20-day SMA), 0.8650.

 Resistance levels: 0.8730, 0.8750, 0.8800.

EUR/GBP Daily Chart