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- EUR/GBP bulls are testing 0.8600 after rallying nearly 0.5% so far this week.
- Eurozone and UK Services PMIs for August have been revised lower.
- ECB-BoE monetary policy divergence keeps pushing the Euro through fresh two-month highs.
The Euro (EUR) extends gains against a weaker British Pound (GBP) for the fourth consecutive day on Thursday, following downward revisions of both the Eurozone and UK Services Purchasing Managers’ Index (PMI) figures. The EUR/GBP pair maintains its bid tone, with bulls targeting a previous support area a few pips above 0.8600 after rallying nearly 0.5% so far this week.
Eurozone final HCOB Services Purchasing Managers Index (PMI) figures have been revised down to 51.6 from the 51.7 previously estimated. Later on the day, the final UK S&P Global Services PMI was revised to 52.5 from preliminary estimates of 52.8.
The Euro is drawing support from the monetary policy divergence between the European Central Bank (ECB) and the Bank of England (BoE). Investors are bracing for a quarter-point ECB rate hike later this month, especially after the hawkish comments by ECB Council member and Bundesbank President Joachim Nagel. The BoE, on the contrary, is widely expected to stand pat on rates at its September 17 meeting.
Technical Analysis: Bulls have broken above a triangle pattern
EUR/GBP broke a key resistance area between 0.8580 and 0.8585 on Wednesday, which was also the top of a triangle pattern, providing fresh hopes for bulls. Momentum indicators on the 4-hour chart remain well into bullish territory, although the Relative Strength Index (14) flirts with overbought levels, a warning that the pair might pull back before rallying higher.
Bulls are likely to struggle at a previous support area, now turned resistance, between 0.8600 and 0.8610 (June 23, 25, 30 lows). Further up, the next level would be the triangle pattern’s measured target, which lies around the June 29 high, in the 0.8630 area.
On the downside, immediate support is seen at the previous top near 0.8585, followed by Wednesday’s low, near 0.8565, and the triangle bottom, near 0.8560.
