EUR/GBP drops to a key static support, eyeing break below 0.87 handle

• EUR/GBP has met a hard support line made up of prior swing low and highs on a bid in the pound. 
• EUR/GBP is currently trading at 0.8718, below the session highs of 0.8771 and up from 0.8710 the recently scored low. 

Parliament's week-long recess in February has been cancelled and Brexit goes to the wire. However, today, it is mostly dollar selling and month-end flows driving the price. Cable shot up 50 pips at the fix and the greenback is being pummeled, extending Fed-related losses from yesterday. 

As for the euro, it is making hard work of dollar weakness as investors remain concerned over global growth factors, trade risks, bank sector risks and the political plight of the EU project. One light of hope, however, is Germany's labour market, putting a clear floor under any recession fears.

"The German labour market remains an impressive engine for the entire economy, currently defying all external downside risks and uncertainties. At least for the time being, there is very little reason to see the last, rather stubborn, stronghold of the economy falling,"

analysts at ING Bank reported. 

Today, though, we saw Euro area Q4 GDP which was softer than prior Y/Y and also showing an unchanged meagre growth rate of 0.2% q/q, as the weakest performance over two quarters since 2013. 

"Although temporary effects from German car sector bottlenecks explain some of the growth drag, the overall economic environment, with a Chinese slowdown, Brexit and fragile risk sentiment in financial markets, also weigh on growth prospects. In light of the latest months' disappointing industrial production data and falling sentiment indicators, we do not believe the euro area economy picked up speed in the past quarter,"

analysts at Danske Bank explained. 

EUR/GBP levels

Analysts at Commerzbank noted that EUR/GBP remains in near term recovery mode and is bouncing from the 0.8620 2018 low which has held on a closing basis:

"We would allow for a possible rally back into the .8775/.8840 band ahead of failing. Failure at 0.8620/18 would suggest ongoing weakness to the base of the channel at 0.8547 and potentially the 200-week ma at 0.8341. The market stays directly offered below the 200-day ma at 0.8864, and only above here allows for a move to the 55-day ma at 0.8907 and this, together with the October 0.8941 high, are expected to contain the topside."