EUR / GBP falls to four-week lows below 0.8450 amid strong pound

• EUR / GBP fell for the third day in a row on Thursday.
• Lower fears for Omicron turned out to be a key factor behind the performance of the British pound.

EUR / GBP extended the bearish rally in Thursday’s European session and tumbled to a four-week low, below 0.8450 in the last hour.

The crossing attempted a recovery hours ago, but it had a trend reversal near the 0.8500 zone, and it resumed with the downward movements, in a context of generalized strength of the pound. Concerns about the rise in COVID-19 cases in the UK were offset by optimism led by reports that current vaccines may be more effective than previously thought in fighting the new variant.

The libra is overcoming for the moment the lack of resolution still existing between the United Kingdom and the European Union by the protocol of Northern Ireland and the political complications of the administration of Boris Johnson. UK Foreign Minister Liz Truss, now in charge of Brexit negotiations, said her position on the Northern Ireland Protocol has not changed. Truss reiterated that the UK remains willing to activate Article 16 if the role of the European court as final arbiter is not completed.

From a technical perspective, the EUR / GBP’s recent pullback from a downtrend line and repeated failures to find acceptance above the very important 200 SMA days supports the prospects for further losses. Therefore, any recovery attempt runs the risk of being short-lived.

That said, relatively limited liquidity conditions in the run-up to the year-end holidays could prevent traders from placing aggressive bearish bets amid relevant economic data that may move the market. However, the bias remains firmly skewed in favor of bearish traders.

Technical levels