EUR/GBP digesting recent strong recovery gains, UK PMI and EZ CPI awaited

The EUR/GBP cross seesawed between tepid gains / minor losses and was confined in a narrow trading band below the 0.8600 handle.

Currently trading around 0.8575 region, the cross struggled for a firm direction and was seen consolidating recent gains for four consecutive sessions, to near three-week highs amid bearish trading sentiment around the EUR/USD and the GBP/USD majors. 

Meanwhile, renewed Brexit fears has kept the British Pound under some selling pressure and assisted the cross to stage a solid recovery from two month lows touched last week. In the latest development on Wednesday, the House of Lords voted to amend the Brexit bill, demanding guarantee for EU migrants living in the UK, and further collaborated to the British Pound's underperformance against its European counterpart, helping the cross to build on to its momentum back above 0.8500 psychological mark. 

Traders, however, seemed to await for economic data lined for release during European session on Thursday before committing to the pair's near-term direction. Today's economic docket features the release of UK construction PMI, which would be followed by the release of flash Euro-zone CPI print and unemployment rate. 

Technical levels to watch

Momentum above 0.8600 handle is likely to trigger a fresh leg of short-covering and seems to lift the cross beyond 100-day SMA hurdle near 0.8620 region, towards testing its next major resistance near 0.8665-70 region. On the downside, 0.8550-45 area now seems to act as immediate resistance support, which if broken could drag the cross back towards 0.85 mark. A subsequent weakness below 0.85 important support would negate any near-term bullish expectations and turn the cross vulnerable to resume with its prior depreciating move.