EUR/GBP: a set-back for the German economy and toppy EUR/USD weigh on the cross

Currently, EUR/GBP is trading at 0.8788, down -0.69% on the day, having posted a daily high at 0.8840 and low at 0.8775.

Moodys downgraded the UK's sovereign rating - Scotiabank

EUR/GBP is back on defence after rallies from 0.8780 territories were faded at the aforementioned highs despite the recent run of EZ data that should be more supportive of the euro. However, traders were disappointed with the result of the German elections, selling into what was already a recipe for the downside in a buy the rumour sell the fact scenario with Merkel winning an additional term to her existing twelve years as Chancellor. 

Germany: A set-back for the economy - ING

Meanwhile, sterling is in a minor correction despite the disappointments in PM May's speech for sterling bulls and Moody’s recent announcements while citing weaker UK public finances and the erosion in medium-term economic strength which will likely result from the leaving the EU as the justification for the downgrade.  

Weighing technically on the euro is the head & shoulders pattern on the daily charts suggesting a top in the market as sterling meets resistance in a minor recovery 10 pips shy of  1.3480 and a few pips shy of the 25th Sep low. 

GBP/USD headed to 1.3350?

EUR/GBP levels

Analysts at Commerzbank explained that EUR/GBP spent most of last week consolidating it has recently halted just ahead of the 0.8743 14th July low and they would allow for further consolidation. "Between here and 0.8713 we have a LOT of support namely the 55-week ma, the 200-day ma and the 2015-2017 uptrend. We have now exited all of our short positions. Intraday rallies are indicated to hold below 8900," the analysts added.