EUR/GBP surrenders early gains, ignores upbeat German IFO index

The EUR/GBP cross trimmed some of its early gains and retreated around 15-20 pips from session tops touched in the past hour.

The cross struggled to gain fresh traction and failed to benefit from today's better-than-expected German IFO index, showing business expectations, current assessment and business climate all coming-in above estimates at 107.3, 125.4 and 116.0, respectively, for the month of July.

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The cross, however, lacked any strong momentum as investors preferred to stay on the sidelines and wait for Wednesday's UK Q2 GDP numbers before positioning for the next leg of directional move.

With sentiment around the shared currency remains biased to the bullish side, amid growing expectations of a possible ECB tapering at the September meeting, the current pull-back would still be categorized as corrective in nature. 

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Hence, fresh buying interest could emerge at lower levels and limit any further corrective slide, with the cross resuming its prior appreciating move, even beyond the key 0.90 psychological mark, remains a distinct possibility. 

Technical levels to watch

A follow through selling pressure below the 0.8920 level (yesterday's low) could extend the corrective slide even below the 0.8900 handle towards its next support near 0.8865 level. On the flip side, momentum back above mid-0.8900s might continue to confront some fresh supply near the 0.8975 level, which if cleared should assist the cross to surpass the 0.9000 handle and head towards its next hurdle near 0.9030 level.