“¢ Italian budgetary worries continue to take the toll on the shared currency.
“¢ Brexit optimism provides an additional boost to the British Pound.
“¢ Technical selling below 200-DMA aggravates the downward pressure.
After an initial uptick to mid-0.8800s, the EUR/GBP cross met with some fresh supply and dropped to near three-month lows during the early European session.
The pair extended this week’s sharp retracement slide from levels beyond the 0.8900 handle and remained under some intense selling pressure for the third consecutive session.
The shared currency’s relative underperformance against its British counterpart could be attributed to the recent concerns over Italy’s budget proposals and some positive incoming Brexit headlines.
On Thursday, news agencies reported that Brexit negotiations with the EU may have reached a major breakthrough as Britain tabled new proposals for avoiding extensive border checks on the Irish border.
This coupled with the latest headlines, via Reuters, saying that the EU Brexit negotiators believe that a divorce deal is ‘very close’ provided a minor lift to the British Pound and kept exerting downward pressure on the cross.
Today’s downfall could further be attributed to some technical selling below the very important 200-day SMA. Hence, a follow-through weakness, amid absent market-moving economic releases, now looks a distinct possibility.
Technical levels to watch
Immediate support is pegged near the 0.8800 handle, below which the cross is likely to accelerate the slide towards mid-0.8700s en-route the 0.8725-20 support area. On the flip side, the 0.8840 region (200-DMA) now becomes immediate hurdle and is closely followed by a strong horizontal resistance near the 0.8865-70 region.
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