EUR/GBP Price Forecast: Cross remains capped near bottom of bullish channel

The Euro (EUR) strengthened against the British Pound (GBP) on Monday, but maintains a cap near the lower end of an ascending channel at 0.8575 following recent drops. The UK's July Manufacturing Purchasing Managers Index (PMI) was revised downward, and the Eurozone's PMI showed slight improvement. However, UK sector activity contracted compared to the previous month.

The BoE's monetary policy remains uncertain, a key obstacle to GBP recovery. TD Securities analysts note that the recent decision suggests most committee members are "still very comfortable keeping rates on hold, given the lack of clear second-round effects observed in inflation data." Consequently, they expect the short-lived GBP rally versus EUR and USD to fade, potentially weighing on GBP.

EUR/GBP is trading at 0.8562, momentarily stuck just below the rising channel floor around 0.8570, keeping the cross restricted in the short term. Momentum indicators are conflicting, with the 4-hour Relative Strength Index (RSI 14) near 53 and the Moving Average Convergence Divergence (MACD) slightly negative, hinting at fading upside momentum.

A drop below 0.8570 might prompt bears to revisit the 0.8545 level, which acted as resistance on Friday and July 28, and the July 23 low of 0.8530. A confirmation above 0.8570 would expose the July 30 high at 0.8585, with 0.8600 from late June as the subsequent resistance.