EUR / GBP falls below 0.8500 for the first time since February 2020

• EUR / GBP fell into negative territory for the third consecutive session on Thursday.
• A sudden spike in demand for the British pound was seen as a key pressing factor.
• Oversold conditions warrant some caution before positioning for a further depreciation move.

The crossing EUR/GBP It fell to more than a year lows during the early North American session, and bears are now looking to extend momentum below the key psychological 0.8500 level.

The cross struggled to capitalize on its modest intraday recovery, instead meeting new offers near the 0.8530-35 region and declining for the third straight session on Thursday. The relative outperformance of the British pound versus its European counterpart could be attributed to a highly successful vaccine distribution program and the gradual reopening of the UK economy.

Aside from this, concerns about the economic consequences of the third wave of COVID-19 infections in Europe undermined the shared currency. This was seen as another factor that contributed to the EUR / GBP falling to the lowest level since February 2020. Investors remain concerned that pandemic-related restrictions could derail the fragile eurozone economic recovery amid the sluggish timing of vaccinations.

That said, a weaker tone around the US dollar extended some support to the euro and could help limit the decline of the EUR / GBP cross. Even from a technical perspective, the daily RSI (14) points to mild oversold conditions and warrants some caution before positioning for any further depreciation movement. Rather, the setup supports the prospects for some short-term hedging bounce.

Technical levels