Having faced rejection above 0.8700 handle, the EUR/GBP cross turned sharply lower and is now trading lower for the first time in three trading session.
After falling short of retesting a multi-month high level of 0.8725 in the previous session, the cross dropped to 0.8645 during early European session on Tuesday before retracing majority of its losses to currently trade around 0.8665-70 region.
Monday's better-than-expected rise in German IFO business climate index accompanied with offered tone around the British Pound provided an additional boost to the pair's recent bullish trajectory. However, the cross lost its upside momentum after both the GBP/USD and the EUR/USD majors respected important technical boundaries and reversed their losses / gains respectively.
In absence of any major market-moving economic releases, the cross might struggle for a firm direction. However, news / developments surrounding Deutsche Bank, Germany’s biggest lender, might weigh on the shared currency and trigger some profit taking move for the EUR/GBP cross.
Technical levels to watch
From current levels 0.8700 handle now seems to act as immediate resistance. A sustained move above 0.8700 handle, leading to a subsequent strength above 0.8716 (Monday's high), should now lift the pair beyond August monthly high resistance near 0.8725 towards testing its next major resistance near 0.8760-65 area.
On the flip side, a follow through selling pressure below session low support near 0.8645 is likely to trigger a corrective move immediately towards 0.8610-0.8600 support area. Any further weakness below 0.8600 handle could be short-lived and is likely to get bought into near 0.8560 horizontal support.
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