EUR / GBP hovers near two-week highs, targeting a sustained move beyond 0.8600

• The EUR / GBP gained some positive traction on Tuesday and built on its recent positive move.
• The moderate BoE, the nerves of COVID-19, acted as a headwind for the British pound.
• A stronger USD weighed on the shared currency and limited any further gains for the crossover.

The EUR/GBP it spiked to nearly two-week highs in mid-European session although it struggled to capitalize on the move beyond 0.8600.

Following the good bounce the day before from the 0.8565 region, the EUR / GBP cross gained some positive traction on Tuesday and built on its recent bounce from the 2-1 / 2-month lows. The relative underperformance of the British pound could be attributed to last week’s dovish Bank of England and concerns about the spread of the more contagious Delta variant of the coronavirus.

In fact, the latest official figures reported showed the UK added 22,868 new coronavirus cases on Monday, the biggest increase in a day since January 30. This overshadowed the latest optimism that the UK is still on track to end the remaining restrictions on social contact. The new British health minister, Sajid Javid, reaffirmed that restrictions related to the coronavirus would be lifted on July 19.

The support factor, to a greater extent, was offset by a general strength in the US dollar, which put some pressure on the shared currency and limited the rise of the EUR / GBP cross. Euro bulls did not seem impressed by German consumer inflation figures, mostly online, which showed headline CPI slipping to 0.4% and 2.3% monthly and annually, respectively.

From a technical perspective, the EUR / GBP cross, so far, has failed to break through resistance marked by a two-month-old downtrend line resistance. A sustained move further will be seen as a new trigger for bull traders and will trigger some aggressive technical buying. The bulls could then aim to test the next relevant hurdle near the 0.8640-50 offering zone.

Technical levels