EUR/GBP trims early gains, upside remains capped at 0.8425 resistance

The EUR/GBP cross is once again reversing from 0.8425 resistance area and has now trimmed some of its early gains to currently trade back below 0.8400 handle.

In absence of any economic releases, the cross was solely driven by weakness in the British Pound on news that BOE member Martin Weale now favored introducing immediate stimulus measures. 

Moreover, upbeat sentiment surrounding the shared currency after Monday's release of stronger than expected German Ifo business climate index provided the required momentum to lift the EUR/GBP cross back above 0.8400 handle. 

The pair, however, lost its upside momentum as the British Pound now staged a minor recovery after an initial slide, dragging the cross back to its recent trading range. 

Focus now shifts to this week’s key releases, which includes – prelim Q2 2016 GDP prints from UK and Euro-zone, and flash estimates of Euro-zone CPI figures for the month of July.

From technical perspective, the EUR/GBP cross has managed to hold and rebound from 20-day SMA support but has failed to extend its momentum decisively above 0.8400 handle, suggesting that the near-term corrective could possibly get extended.

Technical levels to watch

On the immediate downside, bulls would look to defend 20-day SMA support near 0.8325 region, below which the pair seems vulnerable to extend its slide, even below recent swing lows support near 0.8250 region and 0.8200 round figure mark, towards its next major support near 50-day SMA support around 0.8150 region.

On the flip side, sustained bullish momentum above 0.8425 strong resistance seems to lift the pair towards 0.8470 intermediate resistance (July 14 high) before aiming back towards reclaiming 0.8500 psychological mark. A follow through buying interest above 0.8500 handle would confirm resumption of the pair's near-term bullish momentum and thus pave way for a retest of post-Brexit daily closing highs resistance near 0.8580-85 region.