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  • EUR/GBP regained some positive traction on Thursday, albeit lacked any follow-through buying.
  • The supportive fundamental backdrop should continue to underpin the sterling and cap gains.
  • Absent relevant fundamental catalyst further warrants some caution before placing bullish bets.

The EUR/GBP cross held on to its modest gains through the first half of the European session and was last seen trading near the top end of its daily range, around the 0.8765-70 region.

The cross managed to regain some positive traction on Thursday, albeit lacked any strong follow-through buying and remained confined well within this week’s broader trading range. A softer tone surrounding the US dollar extended some support to the shared currency, which, in turn, was seen as a key factor that provided a modest lift to the EUR/GBP cross.

On the other hand, the British pound was seen consolidating its recent strong gains to near three-year tops against its counterpart and remained supportive. That said, a combination of factors might continue to extend some support to the sterling and keep a lid on any runaway rally for the EUR/GBP cross amid absent relevant market moving economic releases.

Investors now seemed to have turned optimistic that the UK’s lead in terms of the coronavirus vaccination drive could facilitate an earlier easing of lockdown restrictions. Apart to this, diminishing odds for any BoE interest rate cut could further underpin the pound and cap the upside for the EUR/GBP cross, at least for the time being.

Hence, it will be prudent to wait for some strong follow-through buying beyond weekly swing highs, around the 0.8800 mark, before placing any fresh bullish bets. A sustained strength above the mentioned level could indicate that the EUR/GBP cross has bottomed out in the near-term and pave the way for further recovery from nine-month lows set last week.

Technical levels to watch