The EUR/GBP cross quickly retreated around 15 pips from the early European session highs and refreshed daily lows, around the 0.8575 region in the last hour.
The cross struggled to capitalize on its modest intraday gains, instead met some fresh supply near the 0.8590 region and is now looking to extend the overnight rejection slide from the 0.8600 mark. The shared currency edged lower in reaction to disappointing Eurozone Retail Sales figures, which unexpectedly declined by 3.1% in July.
On the other hand, the British pound was supported by the prevalent bearish sentiment surrounding the US dollar. This, in turn, was seen as a key factor that dragged the EUR/GBP lower for the second consecutive session on Friday. That said, a combination of factors should lend some support and help limit any deeper losses, at least for now.
The recent spike in new COVID-19 cases in the UK and a slight downward revision of the UK Services PMI might hold traders from placing any aggressive bullish bets around the sterling. Moreover, the recent hawkish comments from a host of European Central Bank policymakers might continue to act as a tailwind for the common currency.
The fundamental backdrop seems tilted firmly in favour of bullish traders and supports prospects for the emergence of some dip-buying at lower levels. Hence, it will be prudent to wait for some strong follow-through buying before confirming that the EUR/GBP cross has topped out and positioning for any meaningful depreciating move.
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