EUR/GBP manages to hold above 200-DMA ahead of BoE

   •  Bulls resilient to give up 200-DMA ahead of BoE.
   •  Dovish BoE rate hike to trigger short-covering bounce. 

The EUR/GBP cross struggled to build on overnight modest recovery move from 3-1/2 month lows and was seen consolidating in a narrow trading range. 

Currently trading around 0.8775-80 band, up little for the day, the cross lacked any firm directional bias on Thursday as investors seemed reluctant to place aggressive bets and wait for the highly-anticipated BoE meeting. 

The UK central bank is widely expected to raise interest rates for the first time in 10-years. However, given that the move is more-or-less fully priced in the market, the announcement could prompt some additional short-covering move, especially after yesterday's resilience below the very important 200-day SMA. 

   •  BoE: 80% priced for a 25bps rate hike today – Rabobank

Investors would also be focusing on accompanying meeting minutes, which if reveals a slim majority in favor of hiking rates should push back expectations of any additional rate hike in the near-term and increase possibilities for a short-term recovery move. 

In the meantime, the release of UK construction PMI might provide some short-term momentum play, but is likely to be overshadowed by the significant event risk.

Technical levels to watch

Any recovery attempt might confront immediate resistance near the 0.8800 handle, above which a fresh bout of short-covering is likely to accelerate the recovery towards 0.8850 area en-route 0.8875-80 strong horizontal hurdle. 

On the flip side, weakness back below 200-DMA, near the 0.8755 region, leading to a subsequent break below 0.8733 level (yesterday's low), could extend the near-term downward trajectory towards 0.8720 level ahead of the 0.8700 handle.