Will inflationary pressures prompt a more hawkish tilt from BoE? Dax rebounds off support, looks to IFO economic sentiment data.

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EUR/GBP  ahead of BoE interest rate decision 

BoE is expected to keep policy unchanged. However, with the economic picture improving and inflation above the BoE’s target will the central bank be prompted to adopt a more hawkish stance? 

Attention will be on the MPC vote on continuing with QE. The May vote was 8-1, should more policy makers dissent, the Pound could get a boost. 

Whilst the economy is ramping up firmly, the BoE will be mindful of rising delta variant COVID cases and the looming end of furlough in the Autumn. 

German IFO economic sentiment data is due. 

Where next for EUR/GBP? 

EUR/GBP trades below its multi-month descending trendline. It trades below its 50 & 100 sma on the 4 hour chart and the 50 sma crossed below the 100 sma in a bearish signal earlier this month.  

The RSI is in bearish territory supportive of further downside whilst it remains above 30, the oversold level. 

Immediate support sit at 0.8530, a level that sellers need to break through in order to bring 0.85 round number and psychological level into focus. 

On the flip side, any recovery would need to break above the 50 sma at 0.8575. A move above this level could negate the near-term downtrend (FXE, FXB).  

Dax finds support ahead of IFO sentiment data 

European bourses are heading higher, rebounding after yesterday’ s selloff. Wall Street closed mixed with the Nasdaq reaching fresh all time highs.  

German IFO economic sentiment data is expected to show that morale improved with expectations for business climate to tick higher to 100.6 in June, up from 99.2. 

More Fed speak in the US session could drive sentiment. 

Where next for the Dax? 

The Dax broke lower from a rising wedge pattern at the end of last week. The index dropped lower finding support on the 50 day ma before rebounding. Moves higher this week have been capped by the 2 week descending trend line.  

The price is on the rise. Any meaningful recovery will need to break above the trendline at 15650 in order to retest the all time high at 15800. 

Still, the MACD is keeping sellers hopeful. Any move lower needs to break through the 50 sma at 15400. A move below 15250, Monday’s low (DAX) .