EUR/GBP clings to gains near 200-DMA, UK services PMI eyed

The EUR/GBP cross maintained positive tone for the third consecutive session and is now meandering around the very important 200-day SMA support, turned resistance, near the 0.8585-90 region.

Spot extended its recovery move and has now recovered around 100-pips from one month lows near 0.8485 region touched on Friday. Lower-than-expected UK manufacturing and construction PMI prints, released on Monday and Tuesday respectively, has been weighing on the British Pound and has been supportive of the pair's ongoing up-move since the beginning of this week.

The cross has been recovering despite of persistent selling pressure surrounding the shared currency as market participants continue to readjust their expectations over ECB's monetary policy outlook, especially after week's report (via Reuters) that revealed policymakers concern over the hawkish misinterpretations of the ECB announcement in March. 

   •  ECB’s Liikanen: Rates would remain low beyond the end of bond purchases

Moving ahead, the final Euro-zone PMI prints would be looked upon for some short-term trading impetus. However, the release of UK services PMI would grab the spotlight and would be a key determinant of the pair's movement on Wednesday.

   •  UK: PMI service index could have moved up marginally to 53.7 in March – Danske Bank

Technical levels to watch

On a sustained recovery beyond 0.8590-0.8600 region (200-day SMA) is likely to trigger a short-covering rally and lift the cross back towards mid-0.8600s, with some intermediate resistance near 0.8625 level. On the flip side, retracement back below 0.8565-60 area now seems to drag the cross back below 0.8535-30 support toward retesting the key 0.85 psychological mark.