EUR/GBP: upside potential limited, time to fade or long until 0.8960?

Currently, EUR/GBP is trading at 0.8839, up 0.19% on the day, having posted a daily high at 0.8871 and low at 0.8801.

After last week's drop in the pound on the back of the UK Q2 GDP growth that was revised down from 1.7% to 1.5%, sterling was hit again in European trade on Monday, despite hawkish talk from Carney over the weekend and Euro lower in a constitutional crisis for Spain

GBP/USD consolidates losses below 1.33, remains near 3-week lows

The UK mfg PMI at 55.9 came in below expectations of 56.4 f/c and the move jettisoned some hefty longs that exaggerated the move in the cross. Eyes are on the annual UK Tory party conference this week and continued deadlock in the Brexit negotiations will likely continue to weigh on the pound, polishing the brass top of 1.3656 vs the dollar on September the 20th. 

However, eyes are fixated on EUR/USD flows to the downside as well with risks below 1.1725 and the 38.2% of the June-Sept 1.1119-1.2092 rise at 1.1720 that was breached Wednesday for a run to 1.1515 at the base of the cloud. Such a move could slow down the crosses minor recovery attempt.

EUR/GBP levels

"We look for a short-term rebound into the .8880/0.8960 band," explained analysts at Commerzbank. 

The analysts explained that EUR/GBP’s recent drop to its 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 0.8725 has 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 .8880/0.8960 band. Below 0.8700 would target the 0.8530/78.6% retracement of the move seen this year," the analysts argued.