EUR/GBP clings to gains near session tops, around 0.8470-75 area

• EUR/GBP staged a modest rebound on Thursday from the vicinity of YTD lows.
• Mixed UK economic data undermined the sterling and provided a modest boost.
• The upside seems limited, warranting some caution for aggressive bullish traders.

The EUR/GBP cross managed to rebound around 25 pips from daily swing lows and was last seen hovering near the top end of its intraday trading range, around the 0.8475 region.

Following the previous day's two-way price moves and an early dip to mid-0.8400s, the EUR/GBP cross found some support ahead of the lowest level since February 2020 touched earlier this week. The British pound's relative underperformance could be attributed to an unexpected jump in the UK trade deficit, to £11.988 billion in June from £9.601 billion.

Adding to this, the UK Office for National Statistics lowered its estimate for the domestic GDP growth in May to 0.6% from an originally reported 0.8% increase. This, to a larger extent, offset better-than-anticipated UK GDP growth figures for the reported month. In fact, Britain's economy grew by a faster-than-expected 1% in June against 0.8% anticipated.

That said, the optimism over the declining trend of new COVID-19 cases and the BoE's hints about modest tightening continued acting as a tailwind for the sterling. This, along with a subdued action around the shared currency, might hold traders from placing any aggressive bets around the EUR/GBP cross and keep a lid on any further gains.

Hence, it will be prudent to wait for some strong follow-through buying before confirming that the EUR/GBP cross has bottomed out in the near term and positioning for any meaningful upside.

Technical levels to watch