EUR/GBP seems vulnerable near 3-week lows, just above mid-0.8900s

• EUR/GBP came under some fresh selling pressure on Thursday and dropped to three-week lows.
• The British pound remained well supported by UK’s £30B stimulus package and Brexit optimism.
• The set-up favours bearish traders and supports prospects for further weakness the 0.8900 mark.

The EUR/GBP cross maintained its offered tone through the mid-European session and was last seen hovering around three-week lows, just above mid-0.8900s.

Following the previous day’s brief pause, the cross came under some fresh selling pressure on Thursday and extended its recent pullback from three-month tops set on June 29. The downfall was sponsored by the prevalent bullish sentiment surrounding the British pound, which remained well supported by the UK government’s £30 billion stimulus package announced on Wednesday.

This comes on the back of the recent optimism over a possible breakthrough in the post-Brexit negotiations. In fact, recent reports indicated that the EU and UK were close to finding a common ground on the issue of fishing rights. Moreover, the EU’s Chief Negotiator, Michel Barnier had said that Brussels is ready to grant the City of London access to EU markets.

The shared currency’s relative underperformance against its British counterpart further contributed to the weaker tone surrounding the EUR/GBP cross. Given the overnight rejection near the key 0.9000 psychological mark, the subsequent downfall points to further near-term weakness and a possible slide back towards retesting the 0.8900 round-figure mark.

Technical levels to watch