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  • EUR/GBP surged to three-month top, early levels suggest downside gap of over 80 pips at the week’s start.
  • UK PM Johnson and EC President Ursula von der Leyen agreed to extend Brexit talks this week.
  • Fears of a no-deal Brexit aren’t off the table.

Having closed near the highest since September, around 0.9160, the early price indicators suggest EUR/GBP to mark a massive gap down below 0.9100 to start the week. The downside gap of near 80 pips is likely to take clues from upbeat Brexit news published during the weekend.

After a tiring session of talks over the future Brexit talks, European Commission (EC) President Ursula von der Leyen (VDL) and UK PM Boris Johnson conveyed that they’re “far apart” on major Brexit issues and called off the discussions.

The pessimistic move dragged the British pound (GBP) heavily during the last week as an abrupt halt to negotiations, or failure to extend the same, highlighted fears of a no-deal Brexit. The same fears were conveyed by the leader of the UK and the EU while exerting additional downside pressure on the British currency.

However, a surprise announcement from The Guardian, citing a call between the EC and the UK leaders during this weekend, suggests that the Brexit talks would “go the extra mile”, continuing talks into this week. However, UK PM Johnson’s comments suggesting, “I’m afraid we’re still very far apart on some issues,” keeps the harsh Brexit fears on the table.

Hence, a week-start gap below 0.9100, currently around 0.9080, may witness a bounce off during the European session if further headlines keep warning the ex-neighbors’ bitter divorce after multi-month negotiations.

Other than the Brexit, hints over the future of BOE actions, based on the no-deal scenario, will also be the key to watch for the EUR/GBP traders.

Technical analysis

Any pullback will have to slip below a three-week-old support line, at 0.9010 now, before ruling out the upside momentum towards attacking the yearly peak surrounding 0.9290.