EUR/GBP jumps back above mid-0.8800s on dismal UK PMI

The EUR/GBP cross extended its recent recovery move from 1-1/2 month lows touched last week and jumped back closer to previous session's over 1-week highs post-UK PMI.

The cross traded with positive bias for the third consecutive session and caught some fresh bids following today’s dismal UK data, showing activity in the construction industry contracted for the first time since August 2016. 

In fact, the final Markit UK construction PMI pointed to a marked slowdown for the third straight month, falling to 48.1 in September, worse than previous month's 51.1 and 50.8 expected. 

Against the backdrop of Monday's weaker than expected UK manufacturing PMI, today's downbeat reading attracted some fresh selling pressure around the British Pound and provided an additional boost to the pair's ongoing recovery move.

It, however, remains to be seen if the cross continues gaining traction or once again meets with some fresh supply at higher levels as the shared currency continues to be weighed down by Sunday's disputed referendum on Catalonia independence in Spain.

   •  Short EUR/GBP for target of 0.85 – Deutsche Bank

Technical levels to watch

Momentum above 0.8875 intermediate resistance is likely to confront strong barrier near the 0.8900 handle, above which a bout of short-covering is likely to accelerate the up-move towards 0.8940 hurdle. 

On the flip side, the 0.8800 handle now seems to protect immediate downside, which if broken could drag the cross back towards 0.8760-50 horizontal support the very important 200-day SMA support near the 0.8725 region.