EUR/GBP bears in control, looking for a close below 0.88 handle

• EUR/GBP is threating closes below key 200-D SMA.
• Cable got a lift on fix demand and market shrugs off PM May's cabinet reshuffle. 

Currently, EUR/GBP is trading at 0.8827, down -0.54% on the day, having posted a daily high at 0.8878 and low at 0.8815. Both the euro and sterling came under pressure in European trade on the back of a correction in the dollar to the upside, albeit limited by the disappointment in the NFP data on Friday. There has been a lack of negative sentiment around Brexit that had otherwise been anchoring the pound and instead, traders look ahead for the likelihood of a further rate hike from the BoE this year. 

However, weekend press brought back the theme of a hard Brexit with the Telegraphs front page news and headlines over PM May to appoint a "no-deal Brexit" minister. In the Sunday Times, it was reported that Johnson, Hammond, Rudd & Davis are to keep their jobs.

EZ data releases:

• German factory orders fell -0.4% m/m in November.
• The Eurozone Sentix investor confidence rose above expectations to 32.9 in January.
• The Eurozone business confidence indicator increased to 116.0 in December.
• The Eurozone retail sales rose 1.5% m/m in November erasing the unexpected decrease of -1.1% m/m in the previous month.

The recent price action was driven more so through EUR/USD flows when the cross fell to EUR/GBP to eye 0.8850 as EUR/USD fell to the 1.1985 expiry level in European trade. That move was extended in the US shift with the level giving out and price moving below 3rd Jan lows and subsequent support with a spike in cable from 1.3440's into the 1.3460's and the euro sliding vs the greenback. Sterling fixing demand was driving cable higher meeting Asian highs of 1.3586.

EUR/GBP levels

 Having eroded the six-month resistance line at 0.8838 to the downside, the cross is vulnerable to the downside and a test of 0.88 figure and a break below the 8th Dec highs of 0.8804. There is risk to the 61.8% retracement of the move seen this year at 0.8697 on further slides and closes on the 0.87 handle. However, the price remains in bullish territory above the 200-D SMA at 0.8821 and, on the wide, analysts at Commerzbank would allow for a move to the 0.9034 October high to unfold. "This guards the 0.9308 August high," the analysts argued.