Oct 19 (Reuters) - Sterling is poised to extend its gains against the euro as a recovery in the pound versus the dollar gathers pace. A monthly close in EUR/GBP below the 200-month moving average (200-MMA) would open the way to major downside targets.

The fundamental drivers remain Bank of England and European Central Bank policy expectations, and broad-based dollar moves.

EUR/GBP has staged a recovery from a new trend low, 0.8395, in early Monday trade but the 200-MMA still has technical significance.

The cross has closed above the average on a monthly basis since May 2025. The average currently sits at 0.8465, while the cross trades at 0.8427, so a close below the average this month would mark a decisive break.

A 76.4% Fibonacci retracement of the December 2024 to November 2025 advance, which ran from 0.8222 to 0.8867, gives a first target at 0.8374. Beyond that level, the April 2025 and December 2024 monthly lows offer more ambitious objectives at 0.8325 and 0.8222, respectively.

Momentum supports the bearish case. The 10-month moving average is set to cross below the 20-month moving average, reinforcing the longer-term downtrend.

A sustained move above September's high at 0.8612 would be needed to challenge the underlying bearish view.
EUR/GBP monthly chart:

(Peter Stoneham is a Reuters market analyst. The views expressed are his own)