Bears target 0.8700 as UK hits major vaccination milestone

• EUR / GBP has fallen to fresh multi-month lows in the 0.8720 region on Monday.
• The UK hits a major self-imposed vaccination target, opening the door for an acceleration of the reopening after the lockdown.
• Optimism of the economic reopening has been fueling GBP sentiment.

The crossing EUR/GBP fell immediately after the resumption of currency trading at 22:00 GMT on Sunday, as optimism over vaccines and the reopening in the UK continues to drive sterling outperformance. Having opened the session closer to the 0.8750 level, the EUR / GBP has now fallen to the low of 0.8720 and the bears have their sights set on a test of the 0.8700 level.

Looking into a long term time horizon, EUR / GBP continues to move lower within a long-term downtrend channel, which he has respected very well over the last few months. For reference, a downtrend that joins the lows of December 31, 2020, January 20 and 21, and February 5 form the bottom line of this downtrend, while a downtrend that joins the highs of 22, 26 and January 28 and the highs of February 4 and 11 form the upper line of this downtrend. Beyond 0.8700, the bears are likely to point to another test of the lower zone of this trend channel, which will likely come into play around the 0.8680 area.

The UK has reached a key milestone in vaccination over the weekend. The country achieved a self-imposed goal of vaccinating 15 million of its most vulnerable citizens against Covid-19 in mid-February.. Everyone in the country’s top four priority groups has been offered at least one vaccine. Meanwhile, internal government forecasts expect the number of hospitalized patients with Covid-19 to halve over the next month.

Given the optimism above, the UK government is understandably optimistic and the British Prime Minister, Boris Johnson said over the weekend that he will design his reopening roadmap on February 22. Johnson said he will prioritize reopening schools (which will likely happen on March 8). The next steps will be to allow the reopening of nonessential retail, followed by hotels and restaurants. Socializing restrictions may also be eased on March 8, and people are likely to be allowed to meet friends as long as it is outdoors, as well as the resumption of some outdoor sports. It should be borne in mind that amid the success of the vaccine, the prime minister faces strong pressure from conservative parliamentarians skeptical of the blockade who want a quick relaxation of the restrictions from April.

All the above factors continue to support sterling’s outperformance versus most of its G10 counterparts. The rapid launch of the vaccine in the country and the recent improvement in Covid-19 infection trends have set the stage for the country to confidently lift the economic restrictions related to Covid-19 significantly earlier than other developed market countries. like the EU, whose vaccination program lags behind the UK sadly. This sets the stage for the UK’s outperformance versus the EU later in the year, which is propelling the GBP.

Keep in mind that although infection rates have declined across the continent, concerns remain about the spread of Covid-19 variants (such as the one first found in the UK or South Africa). According to the news, advisers to the Italian Health Minister have suggested that the country should impose another nationwide lockdown amid concerns about the spread of new Covid-19 variants. Talk of tougher restrictions in the EU stands out while talking about the reopening in the UK, showing the divergent fortunes of the two economic zones and perhaps contributing to weigh on the EUR / GBP.

EUR / GBP technical levels