On Thursday, the EUR/GBP pair managed to strengthen as the GBP was under pressure after the Bank of England meeting.
As expected, current monetary policy in the UK was kept unchanged. At the same time, the BoE lowered its economic forecasts for 2015-2016 and noted a negative impact of the expensive GBP on the pace of inflation recovery. According to the BoE, a rate hike is to be expected no sooner than the second half of 2016 or the beginning of 2017.
The EU statistics remained almost unnoticed. However, Retail Sales declined by 0.1% in September against a 0.2% growth forecast. Moreover, Mario Draghi, President of the ECB, stated the necessity to revise economic prospects before the future stance of monetary policy in the eurozone will be determined.
Support and resistance
Bollinger Bands indicator on the daily chart is falling, while the price range is narrowing down. The indicator permits further growth in the pair. MACD has formed a sell signal. Stochastic is growing and approaching the border of the overbought zone.
The indicators recommend long positions.
Support levels: 0.7100, 0.7079, 0.7041 (5 November low), 0.7015, 0.6984, 0.6850.
Resistance levels: 0.7142, 0.7191, 0.7223, 0.7249 (28 October high), 0.7275, 0.7302, 0.7332, 0.7359.
Long positions can be opened after the breakout of the level of 0.7160 (with appropriate indicators signals) with targets at 0.7230, 0.7280 and stop-loss at 0.7130. Validity - 1-3 days.
Short positions can be opened after the breakdown of the level of 0.7100 with targets at 0.7050, 0.7000 and stop-loss at 0.7130. Validity - 1-3 days.