- EUR / GBP faced rejection near 0.8600 and trimmed strong recovery gains on Friday.
- Expectations of an aggressive change by the BoE triggered a short hedging move around the pound.
- A modest pullback in the dollar extended some support to the euro and could help limit deeper losses.
The EUR/GBP It operates with a slight negative bias throughout the European session and was last seen hovering around daily lows, around the 0.8565-60 region.
The cross struggled to capitalize on its first rally, facing rejection near 0.8600 and has now trimmed a portion of Friday’s recovery move from the lowest level since April 6. The performance of the British pound against its European counterpart could be attributed to expectations of an aggressive change by the Bank of England (BoE). Therefore, the key focus will remain at the BoE’s next monetary policy meeting on Thursday.
On the other hand, the shared currency found some support from a modest pullback in the US dollar from two-and-a-half-month highs. This, in turn, could prevent traders from placing aggressive bets and help limit any deeper losses for the EUR / GBP cross amid the absence of relevant economic releases to move the market. So it will be wise to wait for some follow-up sales before traders start to position themselves for the resumption of the recent slump.
Looking at the technical picture, last week’s drop below the horizontal support at 0.8560 confirmed a bearish breakout through a descending triangle. The appearance of some new sales on Monday adds credibility to the negative outlook and supports the outlook for further weakness. Therefore, a further slide towards the 0.8535 area, en route to the key psychological 0.8500 level, is now well within the means.
Technical levels
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