EUR/GBP holds comfortably above 0.8400 mark, bulls await move beyond 200-day SMA

• EUR/GBP attracts some dip-buying on Monday, though the uptick lacks follow-through.
• The BoE’s gloomy economic outlook is behind the GBP’s relative underperformance.
• Recession fears act as a headwind for the euro and kept a lid on any meaningful gains.

The EUR/GBP cross attracts some dip-buying near the 0.8415 region and turns positive for the fourth successive day on Monday. Spot prices refresh daily highs during the early European session, though seem to struggle to capitalize on the move beyond the very important 200-day SMA around the 0.8435-0.8440 zone.

The Bank of England painted a particularly bleak outlook for the UK economy last week, and indicated that a prolonged recession would start in the fourth quarter. This is seen as a key factor behind the British pound's relative underperformance and is lending some support to the EUR/GBP cross, though the uptick lacks bullish conviction.

Investors remain worried that a halt of gas flows from Russia could trigger an energy crisis in the Eurozone, which could drag the region's economy faster and deeper into recession itself. This might continue to act as a headwind for the shared currency and keep a lid on any meaningful upside for the EUR/GBP cross, warranting caution for bulls.

On the economic data front, the Eurozone Sentix Investor Confidence index improved slightly from -26.4 in July to -25.2 in August. Furthermore, the current situation was up slightly at -16.3 in August from the -16.5 previous and the Expectations Index came in at -33.8. This, however, did little to impress bulls or provide any impetus to the EUR/GBP cross.

The mixed fundamental backdrops make it prudent to wait for strong follow-through buying before confirming that the EUR/GBP cross has formed a base near the 0.8340 region, or a multi-month low touched on August 3.

Technical levels to watch