EUR/GBP Price Forecast: Neutral bias holds as 0.8600 caps the upside

• EUR/GBP edges lower as upbeat UK economic data supports the British Pound.
• Technically, the cross faces firm resistance near 0.8600, with momentum indicators showing limited bullish strength.
• The RSI reflects modest buying interest, while the shrinking MACD bars indicate that upside momentum is cooling.

EUR/GBP edges lower on Friday, drifting toward the lower end of the range seen over the past week. The decline comes as stronger-than-expected UK economic data supports the British Pound (GBP), while the Euro (EUR) struggles against most of its major peers despite the European Central Bank’s (ECB)) hawkish interest-rate hike on Thursday. At the time of writing, the cross trades around 0.8582, down 0.13% on the day.

The UK economy expanded 0.4% MoM in July, beating expectations for no growth and following a 0.3% increase in June. Industrial Production and Manufacturing Production also exceeded forecasts, rising 0.2% and 0.9% MoM, respectively.

Meanwhile, the Euro has failed to benefit from the ECB’s 25-basis-point rate hike as the move was widely expected and largely aimed at containing energy-driven inflation caused by the war in the Middle East. Rising Oil and gas prices present a stagflationary backdrop for the energy-dependent Eurozone. The ECB itself warned that inflation risks are tilted to the upside and growth risks to the downside.

Additional ECB rate hikes remain on the table if energy costs stay elevated. However, the same energy shock has also led traders to price in tighter Bank of England (BoE) policy over the coming months. Although the BoE is widely expected to leave its policy rate unchanged at 3.75% on September 17.

Technical analysis

From a technical perspective, EUR/GBP is seeing limited follow-through after rebounding from below 0.8500 in mid-July, with gains capped by the 0.8600-0.8610 region. This former multi-month support zone now acts as resistance and closely aligns with the 100-day simple moving average (SMA) at 0.8598, creating a firm barrier for buyers.

The near-term outlook remains neutral as the pair holds above the 50-day SMA, while momentum indicators point to a limited bullish bias. The Relative Strength Index (RSI) stands near 54, and the Moving Average Convergence Divergence (MACD) remains marginally positive. However, the fading green histogram suggests that bullish momentum is losing strength as the pair stays capped below the longer-term moving averages.

On the topside, a clear break above the 100-day SMA at 0.8598 and the 0.8600-0.8610 resistance region would open the door toward the 200-day SMA at 0.8648.

On the downside, immediate support is seen at the 50-day SMA near 0.8554. A break below this level would expose the psychological 0.8500 mark, followed by the July low near 0.8455.

(The technical analysis of this story was written with the help of an AI tool. Know more.)