EUR/GBP drops to over 1-week lows, closer to 0.9000 mark
- EUR/GBP witnessed some follow-through selling for the second straight session on Tuesday.
- The euro bulls opted to take some profits off the table after the EU recovery fund agreement.
- Subsequent weakness below the 0.9000 mark might further prompt some technical selling.
The EUR/GBP cross dropped to over one-week lows during the early European session on Tuesday, with bears now awaiting a sustained break below the key 0.9000 psychological mark.
The cross extended the previous day's sharp intraday retracement slide from three-week tops and witnessed some follow-through selling for the second consecutive session. The downfall was exclusively sponsored by some technical buying around the British pound.
The GBP bulls seemed rather unaffected by dovish language from the Bank of England’s chief economist Andy Haldane on Monday. Haldane said that we would need to think about further lowering of the cost of borrowing if there was a further negative shock to the economy.
On the other hand, the shared currency struggled to capitalize on its early gains that came after the European Union leaders agreed on an unprecedented stimulus package worth €750 billion. The pandemic recovery fund is aimed at aiding the region’s worst-hit economies.
Given that the optimism has been flowing into the common currency over the past few weeks, investors seemed inclined to take some profits off the table. The market reaction was pretty much a 'buy the rumour, sell the fact' trade, suggesting further downside for the EUR/GBP cross.
In the absence of any major market-moving economic releases, either from the UK or the Eurozone, a convincing break below the 0.9000 mark could prompt some technical selling. The EUR/GBP cross might then accelerate the slide further towards the 0.8960-55 support area.
Technical levels to watch