- EUR/GBP dropped to over two-week lows amid strong buying around the sterling.
- The set-up favours bearish trades and supports prospects for additional weakness.
- Recovery attempts might remain capped near 0.9050 confluence support breakpoint.
The EUR/GBP cross weakened further below the key 0.9000 psychological mark and dropped to over two-week lows during the mid-European session amid hopes for a last-minute Brexit deal. The British pound maintained its strong bid tone and had a rather muted reaction after the Bank of England announced its latest monetary policy decision.
Meanwhile, the EUR/GBP cross, so far, has managed to defend static support near the 0.8980 region, held since the beginning of this month. The mentioned region coincides with the very important 200-day SMA, which if broken decisively will set the stage for an extension of the recent sharp pullback from near three-month tops set last Friday.
That said, acceptance below the 61.8% Fibonacci level of the 0.8867-0.9230 recent strong positive move might have already set the stage for additional weakness. The negative outlook is further reinforced by the overnight break below the 0.9050 confluence support – comprising of over three-week-old ascending trend-line and the 50% Fibo.
An eventual fall below the 0.8980 support will now be seen as a fresh trigger for bearish traders and turn the EUR/GBP cross vulnerable to accelerate the slide back to test the 0.8900 round-figure mark. The downward trajectory could further get extended and drag the cross further towards November monthly swing lows support near the 0.8865-60 zone.
On the flip side, any attempted recovery back above the 0.9000 mark (61.8% Fibo.) might now be seen as a selling opportunity. This, in turn, should cap the upside for the EUR/GBP cross near the mentioned confluence support breakpoint, now turned resistance, near mid-0.9000s.
EUR/GBP 4-hourly chart
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Technical levels to watch
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