EUR/GBP tumbles below 0.86 mark to test 200-DMA important support

The EUR/GBP cross remained under intense selling pressure on Thursday and broke below the 0.8600 handle to its lowest level since early March.

Spot extended previous session's sharp reversal move from two-week highs and dropped to the very important 200-day SMA support near the 0.8580-75 region. Fading expectations that the ECB would further reduce its monetary stimulus measure, coupled with a worse-than-expected drop in the German CPI print, was seen weighing heavily on the shared currency.

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Adding to this, goodish recovery move around the GBP/USD major, possibly led by short-covering, further collaborated to the strong bearish sentiment surrounding the EUR/GBP cross. 

Meanwhile, possibilities of some stops getting triggered on a sustained weakness below 0.8615-10 strong horizontal support also seems to have aggravated the selling pressure and contributed to the pair’s downslide to four week lows, the lowest level since March 3.

With the UK PM Theresa May formally starting the Brexit proceedings, market participants keenly await Donald Tusk's, President of the European Council, response in order to determine the next leg of directional move for the British Pound. 

Technical levels to watch

On a sustained weakness below 0.8575 (200-day SMA), the cross is likely to extend the depreciating move towards 0.8545-40 horizontal support before eventually dropping to test the key 0.8500 psychological mark. 

Meanwhile on the upside, any recovery move above the 0.8600 handle might now confront strong resistance near mid-0.8600s, which if cleared might negate any near-term bearish bias and lift the cross back beyond 0.8700 round figure mark towards testing 0.8730 strong resistance (yesterday's swing high).