Pound retreats as EUR/GBP rebounds from key technical support level

Technical Analysis

Author: Justin Low | eurgbp

EUR/GBP buyers put up another defense at 0.8866-67

EUR/GBP buyers put up another defense at 0.8866-67
The pound has slumped to fresh lows on the session, with cable now dropping to 1.3533 and testing a break of the 61.8 retracement level of its recent swing higher @ 1.3547 and also a key trendline support from 21 December (seen below).

But the push lower in the quid is arguably coming from a rebound in EUR/GBP upon testing key support @ 0.8866-67 towards the latter stages of last week.

The level has held any downside push in the pair since June last year and continues to be a key level that buyers are leaning on in limiting any major upside in the pound.

In turn, that has also seen GBP/USD keep a defense of 1.3700 towards the end of last week - pound buyers also struggled to breach that to start the new year.

While the pound has proven to be resilient despite UK virus worries and the concerning realities of Brexit, there is still much to be desired besides any talk of valuation.

In the long-term, the pound may still be regarded as undervalued in some quarters but the present environment is still rather challenging.

The vaccine optimism is certainly helping to remove some of the uncertainty but the UK economy may still be caught in a long struggle to escape post-Brexit woes in the coming years, keeping pressure on the BOE to perhaps ease further.

Going back to EUR/GBP, there was a clear line in the sand for the pound to challenge the stigma above but so far that isn't proving to be the case.

On every rebound of the 0.8866-67 level, the pair has moved back up to 0.9000 at least and with the euro also meeting key support against the dollar, perhaps the push higher here is just what it needs to get a much needed boost after the recent slump.
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GBP/USD H1 18-01 
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