EUR/GBP: The Euro reintegrates the 300-pip range

• Italy political uncertainties coupled with EU-UK trade deal make the pair highly rangebound.
• The EU and UK macro data moves the pair within the 0.8700-0.9000 range.   

The EUR/GBP is trading slightly down at 0.8900 losing approximately 0.40% on Monday with the Euro being more vulnerable to the news of Italian political risk emerging as the anti-Euro and anti-immigrant parties won the Sunday parliamentary elections. 

The eurosceptic, anti-establishment Five Star Movement and the Northern League (Lega Nord) won the weekend elections with political analysts estimating that it may take weeks to form a new government as well as a potential new coalition between the Five Star Movement and the Northern League. 

Adding to this the uncertainties regarding the EU-UK trade deal, the EUR/GBP price action is certainly reflecting this state of affair with the pair trading essentially in a 300-pip range oscillating between 0.8700 and 0.9000. 

The UK manufacturing output data is scheduled for Friday. However, it seems that until March 22 the market will likely focus on any detail of the EU-UK trade deal. March 22 being the date for the next European summit where a European-United Kingdom trade deal should be concluded.

The key macroeconomic event for the Eurozone is scheduled to be on Friday with the ECB meeting.  

Earlier on Monday, the Eurozone Markit PMI composite, the Sentix investor confidence and Eurozone retail sales for January all came below expected while the UK services PMI came out better than expected at 54.5 as it was expected to rise to 53.3 in February. There has been no major reaction as the market is trading only 30 pips lower since the start of the week. 

Technically 0.8950 is the intraday high and therefore the first resistance to be broken for bulls. Furter up, 0.9000 is the key resistance which has been capping bull attacks since October 2017. To the downside, the next intraday support is seen at Friday’s opening price and psychological number 0.8900. A break below it could lead to the 0.8850 level which is the 38.2% Fibonacci retracement from the January-February upswing. 

EUR/GPY daily chart