EUR/GBP comes down to test 0.8800 on Spanish Vote

The bearish sentiment behind the Euro is driving the latest fall seen in EUR/GBP cross, as the Spanish political scenario worsens after the weekend’s Referendum vote.

EUR/GBP: 0.8765 on sight

The cross in EUR/GBP stalled its three-day recovery mode and came under renewed selling pressure, after the common currency slumped across the board, following a Spanish referendum vote conducted on Sunday,  the results of which showed that 90% Of Catalans voted "Yes" to leave Spain – RTRS

This adds to the recent corrective down move triggered in the Euro, which was triggered after the disappointing German election outcome and an unexpectedly hawkish FOMC.

On the GBP-side of the story, some respite is offered to the cross, as the rub-off effect on the pound, in the wake of the EUR/USD decline, helps restrict the losses. However, the stalled selling in EUR/GBP is expected to be short-lived, as the cross is expected to come under renewed selling pressure on the European open. Theresa May’s speech: Cabinet is agreed on Brexit approach

Calendar-wise, the Euro area final manufacturing PMIs will be eyed ahead of the UK manufacturing PMI report.

EUR/GBP Technical Set-up  

Karen Jones, Analyst at Commerzbank, explained: “EUR/GBP will shortly encounter stronger support at the .8743 14th July low and the daily RSI has diverged on the move to a new low. Between here and .8713 we have a LOT of support namely the 55 week ma, the 200 day ma and the 2015-2017 uptrend. We note the TD perfected set up on the daily as well and we look for a short term rebound into the .8880/0.8960 band. Below .8700 would target the 0.8530/78.6% retracement of the move seen this year”.