EUR/GBP drops to monthly lows before retracing back to 0.7650

A fresh wave of buying interest around the British Pound seems to have emerged in last few hour of trading, dragging the EUR/GBP cross to monthly low level near 0.7625 level. The pair, however, has managed to recovery from low to currently trade around mid-0.7600s.

The sterling's relative outperformance against the shared currency could be attributed to growing optimism that Briton's are unlikely to vote for a Brexit and UK will remain in the European Union.

Another factor that has kept the shared currency a relative underperformer was weaker-than-expected Euro-zone services PMI number. However, strong manufacturing PMI prints seem to offset the negative impact and hence might restrict further sharp downslide for the EUR/GBP cross.

Going forward, investors will keep a close watch on developments surrounding the Brexit vote that has the potential to produce a knee-jerk reaction in global financial markets.

Technical outlook

Team of Analysts at XM Investment Research notes, "EURGBP has a neutral short term bias, capped below the key 0.80 level and is above the 50% Fibonacci retracement level of the November to April upleg from 0.6981 to 0.8116. This level lies at 0.7547 and acts as important support, which if broken, would shift the outlook from neutral to bearish. The next target down would be at 0.7414, the 61.8% Fibonacci retracement level. Upside momentum was lost after RSI fell below 50 into bearish territory last week, which suggests there is risk for further downside in the near term."

"Currently, prices are finding resistance from the key 0.77 level. Above this, the 50-day moving average is another major barrier before resistance at the 23.6% Fibonacci at 0.7848. Only a move above 0.80 would strengthen the probability of a resumption in the uptrend that was in place from 0.6981 to 0.8116."