EUR/GBP drops to the lowest since February 2020, further below 0.8500 mark
|- EUR/GBP edged lower for the second consecutive session on Monday.
- Holiday-thinned liquidity conditions warrant caution for bearish traders.
The EUR/GBP cross witnessed some selling during the early European session and dropped back below the key 0.8500 psychological mark in the last hour. The cross was last seen trading around the 0.8485 region, or the lowest level since February 2020.
Following a brief consolidation through the early part of the trading action on Monday, the cross met with some fresh supply and turned lower for the second consecutive session. The British pound's relative outperformance against its European counterpart could be attributed to a highly successful vaccination distribution program and the gradual reopening of the UK economy.
Apart from this, concerns about the economic fallout from the third wave of COVID-19 infections in Europe undermined the shared currency. This was seen as another factor that contributed to offered tone surrounding the EUR/GBP cross. Investors remain worried that pandemic-related restrictions could derail the fragile Eurozone economic recovery amid the slow pace of vaccinations.
The euro was further pressured by a modest uptick in the US dollar, which remained well supported by Friday's blockbuster NFP report and a fresh leg up in the US Treasury bond yields. That said, oversold RSI (14) on the daily chart warrants some caution for bearish traders amid absent relevant market-moving economic releases, either from the Eurozone or the UK.
Investors might also refrain from positioning for any further depreciating move amid holiday-thinned liquidity conditions. Given that the European markets are closed in observance of Easter Monday, the set-up support prospects for some near-term short-covering bounce.
Technical levels to watch
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