EUR/GBP looking for direction, with upside attempts limited below 0.8625

• Euro's recovery attempt from 0.8570 stalls right above 0.8600
• The pair treads water ahead of the BoE's monetary policy decision.
• EUR/GBP is hovering above key support at 0.8570.

The euro has remained moving sideways against the British pound on Tuesday, as Monday’s rebound from 0.8570 lows remains limited below 0.8625. From a wider perspective, the pair remains trapped within a negative channel from late September highs above 0.9000.

Sideways consolidation ahead of the BoE’s meeting

The negative pressure on the euro witnessed last week seems to have eased, which allowed the pair to trim losses on Monday. The investors are more cautious, awaiting the outcome of the Bank of England’s monetary policy meeting, due on Thursday.

The Bank of England is widely expected to hike rates by 0.75%. The market, however, contemplates the possibility of some hints to less aggressive tightening in the months ahead, as the bleak economic prospects will force them to lift their feet off the pedal to avoid accelerating the economic downtrend.

On the political front, the market enthusiasm on the news of the appointment of Rishi Sunak as British Prime minister has ebbed. The pound has lost momentum, following a 5-day rally, with the focus shifting to the huge challenges ahead following a historical market turmoil amid a deteriorating economic outlook and with a divided Tory party.

EUR/GBP: Hovering above important support at 0.8570

From a technical point of view, the pair has found support at a key 0.8570 area (September 7 and October 17 and 28 lows). Below here next downside targets would be the downward trendline support, from mid-November lows, which meets the 200-day SMA at the 0.8500 area.

On the upside, the pair should extend past session highs at 0.8625 to target the 50-day SMA, at 0.8690 to aim for the October 21 high at 0.8780.

Technical levels to watch