EUR/GBP: headed to 0.8920?

Currently, EUR/GBP is trading at 0.8876, up 0.43% on the day, having posted a daily high at 0.8884 and low at 0.8822.

EUR/GBP is testing the 0.8880 area after another leap higher overnight in European trade, extending beyond yesterday's highs for the same shift at 0.8868. Despite the bearishness around the euro, it is proving to be resilient and bouncing back across the board, while sterling, on the other hand, has even struggled in the face of lower US yields.

GBP/USD: watching for PM's speech tomorrow - Scotiabank

For the EZ data, producer prices came in on a positive note, rising 0.3% MoM and 2.5% on a yearly basis. For the UK, we already saw Monday's weaker UK manufacturing PMI weigh on the pound and today's data indicated a contraction in the UK construction activity. Coupled with the misinterpretation from the BoE of rates recently,  the economy could indeed be losing momentum on the back of these data components. Against a backdrop of the Brexit deadlock, the pound is suffering and markets will now look to MP May's speech tomorrow. 

EUR/GBP levels

Analysts at Commerzbank explained EUR/GBP continues to recover, we highlighted recently that its drop to the September low at 0.8746 was accompanied by positive divergence on the daily RSI: "The current bounce from above the 0.8743 14th July low and the 200-day ma at 0.8726 have thus not come as a surprise. Between here and 0.8717 we have a LOT of support namely the 55-week ma, the 200-day ma and the 2015-2017 uptrend. We look for a short-term rebound into the 0.8920/75 band. Below 0.8700 would target the 0.8530/78.6% retracement of the move seen this year," the analysts at Commerzbank argued.