- EUR/GBP regained traction on Tuesday and recovered further from the overnight swing lows.
- Persistent Brexit uncertainties, stricter lockdown in London took its toll on the British pound.
- The euro benefitted from sustained USD selling bias and remained supportive of the uptick.
The British pound witnessed some selling during the early European session and pushed the EUR/GBP cross to two-day tops, around mid-0.9100s in the last hour.
The cross built on the previous day’s solid intraday bounce from the 0.9045 area and gained some strong follow-through traction through the first half of the trading action on Tuesday. Reports about the lack of progress on post-Brexit talks tempered investors’ optimism that a deal can still be reached.
Earlier on Monday, the EU’s chief Brexit negotiator, Michel Barnier reiterated that there has been limited progress on enforcement mechanisms and disagreement on State Aid. This, along with the imposition of stricter lockdown in London, took its toll on the sterling and provided a goodish lift to the EUR/GBP cross.
On the other hand, the shared currency remained well supported by a softer tone surrounding the US dollar, which languished near two-and-half-year lows amid hopes for additional US fiscal stimulus. this, in turn, was seen as another factor driving the EUR/GBP cross higher for the second consecutive session on Tuesday.
With the latest leg up, the cross has now filled the weekly bearish gap and seems poised to challenge a multi-month-old descending trend-line resistance, around 0.9180 region. Some follow-through buying beyond the 0.9200 mark will be seen as a fresh trigger for bullish traders and pave the way for additional gains.
Technical levels to watch