EUR / GBP falls to six-month lows near 0.8850

• The pound continues to perform well among the G10 currencies.
• EUR / GBP retraces for the third day in a row and tests important support.

The EUR / GBP is falling again and accumulates a decline of 150 pips since the week started. The crossing came down on Wednesday until 0.8860, the lowest level since mid-May. It remains near the lows with the bearish tone intact.

A combination of factors is favoring the pound against the euro. On the one hand, the optimism of equity markets around the world As a result of the novelties regarding the coronavirus vaccine, they drive the demand for riskier assets. This, in turn, is more favorable to the pound than to the euro.

Another key factor is the expectation that an agreement will be reached between the United Kingdom and the European Union for the Brexi. Negotiations continue in London these days and it is reported that the parties have moderated some positions in search of an agreement. The pound tends to rise when the chances of a deal increase.

The key event for the next few hours will be the speech of the president of the Banco Central Europeo, Christine Lagarde. Traders will closely follow what happens in the stock markets and the news around Brexit.

Testing medium term support

From a technical point of view, the EUR / GBP remains bearish and is in the long-term support zone around 0.8850 / 60, which slowed the declines in September and June. A confirmation below would increase the bearish tone, favoring a decline towards 0.8800. In case of holding above, some rebound of the euro could be expected. Just rising above 0.9070, the bearish bias would be invalidated.