EUR/GBP retreats further, hits fresh lows under 0.9200

EUR/GBP has been moving all day with a bearish bias and is testing the 0.9200 handle. The pair continues to retreat from multi-year highs that reached yesterday above 0.9300. 

The euro started to decline after EUR/USD was unable to hold on top of 1.2000, affected by a recovery of the US dollar and probably amid some profit taking. 

The slide of EUR/GBP accelerated during the last hours. The risk-on environment favored the pound while the euro was unable to find support from economic data that included German inflation and EZ economic confidence (the index reached the highest in a decade). Tomorrow inflation data from the region will be released.

At the time when EUR/GBP was above 0.9300 and EUR/USD on top of 1.2000, expectations about a verbal intervention from Draghi to curb euro’s strength at next week ECB meeting rose significantly. 

German inflation brings good news for ECB - ING 

ECB: Can verbal intervention be effective to cap the strength of EUR? - ING

EUR/GBP outlook 

The main trend continues to point to the upside, but doubts about the short-term outlook have emerged. EUR/GBP yesterday closed practically unchanged, forming a “doji” candlestick that could signal exhaustion to the upside. 

Today’s retreat, the largest one-day slide since mid-July, opens the door to a period of correction/consolidation. Below 0.9200, the next support might be seen at 0.9145. On the upside, if the euro rises back above 0.9275 it could gain momentum for another test of the 0.9300 handle.