EUR/GBP breaks below 0.8800 mark, back closer to 2-month lows

The shared currency held weaker against its British counterpart, now pushing the EUR/GBP cross below the 0.8800 handle and closer to two-month lows support. 

The latest political landscape in the Euro-zone's largest economy, Germany, where in Merkel's Conservatives (CDU) Party now needs to work to form a coalition without its current coalition partner, the social democratic SPD, weighed on the Euro at the start of a new trading week. 

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Meanwhile, the market seems to have digested Moody's downgrade of the UK's credit rating on Friday and hence, a strong recovery in the GBP/USD major further collaborated to the pair's weaker tone through early European session.

Moving ahead, any fresh news coming out of the fourth round of Brexit talks would now drive sentiment around the British Pound and provide some fresh directional impetus for the cross.

Also in focus would be the ECB President Mario Draghi's testimony before the European Parliament Economic and Monetary Affairs Committee would be scrutinize for signals over tapering ECB's €60bn bond-buying program and should also contribute towards determining the next leg of directional move for the cross. 

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Technical levels to watch

A follow through weakness below 0.8780-75 area is likely to accelerate the fall towards 0.8740 level before the cross eventually darts towards testing the 0.8700 handle. 

Meanwhile, on the upside, any recovery attempts beyond 0.8810 level might now confront some fresh supply near mid-0.8800s and a subsequent up-move seems more likely to be capped near the 0.8890-0.8900 region.