EUR/GBP drops to 4-1/2 month lows, below 200-DMA on upbeat UK PMI

   •  UK manufacturing PMI rises to 56.3 in October.
   •  BoE rate hike expectations to cap recovery. 

The EUR/GBP cross remained under some selling pressure for the sixth consecutive session and refreshed 4-1/2 month lows post-UK data. 

The cross accelerated its near-term bearish trajectory and fell further below the very important 200-day SMA, to 0.8740 area after data released from the UK showed manufacturing PMI rose to 56.3 in October, up from previous month's 55.9 and 55.8 expected. 

   •  UK manufacturing PMI surprises positively in October

Meanwhile, firming expectations that the BoE would eventually move towards raising rates on Thursday continues to underpin the British Pound and also collaborated to the pair’s slide to its lowest level since mid-June. 

Moreover, reports that the EU Chief Brexit negotiator Michel Barnier was ready to speed up the Brexit negotiations might now limit any immediate recovery attempts for the cross. 

Technical levels to watch

Immediate support is pegged near 0.8720 level, below which the cross could extend the downslide even below the 0.8700 handle towards its next major support near the 0.8650-40 region.

On the flip side, sustained recovery beyond 0.8765-70 area might trigger a short-covering bounce towards the 0.8800 handle en-route 0.8850-55 strong barrier.