EUR/GBP slides to fresh session lows, further below mid-0.8600s

The EUR/GBP cross maintained its offered tone through the mid-European session and dropped to fresh daily lows, around 0.8630 region in the last hour.

The cross witnessed some selling during the second half of the trading action on Wednesday and moved further away from over two-week tops, around the 0.8670 region touched in the previous session. The shared currency's relative underperformance lacked any obvious fundamental catalyst and could be solely attributed to a modest US dollar rebound from multi-month lows.

On the other hand, the British pound remained well supported by the optimistic outlook for the UK economic recovery amid the gradual easing of lockdown measures. The impressive pace of coronavirus vaccinations, along with the effectiveness of COVID-19 vaccines against the Indian variant, bodes well with the UK government's plan to end restrictions fully on June 21.

The combination of factors exerted some downward pressure on the EUR/GBP cross, though fears over the long-term impact of Brexit might help limit any further losses. This makes it prudent to wait for some strong follow-through selling before confirming that the recent positive move has run out of steam and positioning for any meaningful slide amid absent relevant economic releases.

Nevertheless, the EUR/GBP cross, for now, seems to have snapped two consecutive days of the winning streak and erased a major part of the overnight gains. The 0.8625-20 region might act as immediate support ahead of the 0.8600 mark, which if broken decisively might prompt some technical selling and accelerate the slide towards monthly swing lows, around the 0.8560 region.

Technical levels to watch