“¢ Negative Brexit headlines weigh heavily on GBP and led to a bullish weekly gap.
“¢ Italy’s budget/debt situation drags the EUR and keeps a lid on any runaway rally.
The EUR/GBP cross climbed to over one-week tops touched in the last hour, albeit quickly retreated few pips thereafter and is currently placed just a few pips above mid-0.8700s.
After Friday’s goodish rebound from over six-month tops, the cross opened with a bullish gap at the start of a new trading week and was being supported by a heavily offered tone around the British Pound, led by some fresh negative Brexit headlines over the weekend.
The British Pound came under some intense selling pressure on the back of a report that four more ministers, who backed remaining in the EU, could resign over Brexit tensions and that the EU rejected the UK PM Theresa May’s plan for an independent mechanism to oversee Britain’s departure from any temporary customs arrangement it agrees.
Further gains, however, remained capped amid concerns over a standoff between Rome and Brussels over Italy’s budget proposals, which was seen exerting some fresh downward pressure on the shared currency. Bullish traders seemed rather unaffected by the news that Italy’s Economy Minister Giovanni Tria is considering to tweak the plan by lowering 2019 growth forecast to meet EU budget demand.
Italy is requested to submit a revised draft budget plan to the Commission by November 13, i.e. tomorrow, and in absence of any major market moving economic releases, either from the UK or the Euro-zone, the incoming political headlines might continue to play an important role in influencing the pair’s momentum through Monday’s trading session.
Technical levels to watch
Momentum beyond 0.8775 (session tops) is likely to get extended towards reclaiming the 0.8800 handle before the cross eventually darts to the 0.8830-40 supply zone. On the flip side, any meaningful retracement now seems to find some support near the 0.8735-30 region, below which the cross is likely to head back towards challenging the 0.8700 round figure mark.
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