EUR/GBP rebounds few pips, still in red near 6-month lows
• The UK reaches historic Brexit divorce deal.
• Market reaction suggests news was already priced in.
• UK manufacturing data eyed for fresh impetus.
The EUR/GBP cross pared some of its early losses and quickly recovered around 15-20 pips from 6-month lows touched in the past hour.
The cross found some decent support near the 0.8700 handle and stalled overnight bearish slide below the very important 200-day SMA, despite the latest positive Brexit news.
The UK reached a historic deal on its EU exit terms on Friday but the market reaction clearly indicates that the news was already priced in by the markets and hence, seems to have prompted some profit-taking off bullish GBP bets.
The recovery attempt, however, lacked any follow through momentum and was being capped by persistent selling around the EUR/USD major. Hence, traders are likely to wait for the UK macro releases before positioning for the pair's next leg of directional move.
Today's UK economic docket features the release of manufacturing/industrial production, trade balance data and NIESR GDP estimate. In absence of any major market moving economic releases from the Euro-zone, the GBP price dynamics might continue to act as an exclusive driver of the pair's movement on the last trading day of the week.
Technical levels to watch
Any meaningful recovery attempts might now confront fresh supply near mid-0.8700s, above which the cross is likely to head back towards retesting 200-day SMA hurdle near the 0.8800 handle.
On the flip side, weakness below the 0.8700 handle would reaffirm near-term bearish bias and turn the cross vulnerable to head towards testing 0.8655-50 horizontal support.