- EUR / GBP is witnessing aggressive selling on Monday and falls to week-long lows.
- The tight results of the German elections provoke some selling around the common currency.
- The UK fuel crisis could weigh on the British pound and limit EUR / GBP losses.
The emergence of strong sales around the common currency has dragged the EUR / GBP cross to one-week lows, around the 0.8530-25 region, during the first half of the European session on Monday.
Following an initial region rally of 0.8575-80, the EUR / GBP cross witnessed aggressive selling on Monday and extended last week’s pullback slide from the 0.8610-15 region to monthly highs. The center-left Social Democrats (SPD) recorded a narrow victory on the party of incumbent Chancellor Angela Merkel in a hotly contested German election on Sunday. The tension of the outcome means that coalition-building negotiations are likely to be complex and time consuming, which in turn has affected the common currency.
Apart of this, a nice rebound in demand for the pound sterling it has turned out to be another factor that has contributed to the strongly bearish tone around the EUR / GBP cross. That said, the growing signs of UK fuel crisis could prevent GBP bulls from opening aggressive positions. In fact, the Petroleum Retailers Association has said that between 50 and 90% of its members reported running out of fuel. Aside from this, a good pickup in demand for the US dollar could do even more to limit sterling gains and provide some support to the cuce.
Therefore, any subsequent decline is likely to find decent support and remain capped near the key psychological 0.8500 level amid the absence of economic releases on Monday. Therefore, it will be prudent to wait for a sustained break below the mentioned level before positioning for any further bearish movements. Market participants are now awaiting the speech of the President of the ECB, Christine Lagarde, to give a new impetus. Later during the American session, the comments of the Governor of the Bank of England, Andrew Bailey, could influence the GBP and also generate some short-term trading opportunities around the EUR / GBP cross.
EUR / GBP technical levels
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