EUR/GBP flirts with session lows, around 0.8565-60 region

The EUR/GBP cross traded with a mild negative bias through the mid-European session and was last seen hovering near daily lows, around the 0.8565-60 region.

The cross struggled to capitalize on its early uptick, instead faced rejection near the 0.8600 mark and has now eroded a part of Friday's recovery move from the lowest level since April 6. The British pound's relative outperformance against its European counterpart could be attributed to expectations for a hawkish shift by the Bank of England (BoE). Hence, the key focus will remain on the upcoming BoE monetary policy meeting on Thursday.

On the other hand, the shared currency found some support from a modest US dollar pullback from two-and-half-month tops. This, in turn, might hold traders from placing any aggressive bets and help limit any deeper losses for the EUR/GBP cross amid absent relevant market moving economic releases. Hence, it will be prudent to wait for some follow-through selling before traders start positioning for the resumption of the recent downfall.

Looking at the technical picture, last week's decline below the 0.8560 horizontal support confirmed a bearish break through a descending triangle. The emergence of some fresh selling on Monday adds credence to the negative outlook and supports prospects for additional weakness. Hence, a subsequent slide towards the 0.8535 area, en-route the key 0.8500 psychological mark, now looks a distinct possibility.

Technical levels to watch