EUR/GBP drops to fresh weekly low on Draghi’s comments

The EUR/GBP cross extended its rejection slide from 0.8700 handle touched on Wednesday and has now dropped to fresh session low during opening statements at the ECB pressure.

Comments from ECB President Mario Draghi that there was no convincing upward trend in underlying inflation trajectory attracted some renewed selling pressure around the shared currency. The cross, however, has just managed to defend 0.8600 handle as Draghi seemed convinced of a stronger Q4 growth and expected recovery to firm further.

Meanwhile, subsequent remarks that ECB's governing council did not discussed how to implement QE reduction and there was more room to diversify / revise QE strategy, if necessary, might now restrict any recovery attempts and could even turn the cross vulnerable to extend its downward trajectory. 

Meanwhile, the prevalent recovery trend around the GBP/USD major was also seen collaborating to the pair's offered tone on Thursday. The cross was last seen trading around 0.8620 region, moving on the brink of breaking below 0.8625 immediate support. 

Technical levels to watch

Watch out for a break below 0.8625 level, which could accelerate the slide towards 0.8600 handle before eventually dragging the cross to 50-day SMA support near 0.8540 region. On the upside, 0.8670 level now becomes immediate hurdle, which if cleared could lift the cross back towards 0.8700 handle, en-route its next major resistance near 0.8760 level.