EUR/GBP: a retracement towards the 55 and 200 day moving averages on the cards

• EUR/GBP has been capped in its advance off 0.89 the figure and has turned south from the highs of 0.90 the figure.
• EUR/GBP is currently trading at 0.8976 at the time of writing, but off its low of 0.8961 as we head into the FOMC minutes on the hour.

The euro and sterling have both been tracking the performance in the greenback. There had been some fresh rounds of positive data this week for the UK in the public finances beat, but news wires have been restricted to the Brexit headlines, that have been positive in the main, giving the pound the edge. 

" EU negotiator Barnier sounded hopeful that common ground can be found but it is clear that discussion has made little or no progress recently and key stumbling blocks remain unresolved,"

analysts at Scotiabank noted and explained that Barnier conceded that talks may run on after Oct but stressed that negotiations needed to be wrapped up well before year-end. 

A complex mix of fundamentals for the cross

As for the euro, it has neared two-week high as markets await Fed minute while stops may have been targetted in periods of low liquidity. There is little rhyme nor reason to the euro's impressive recovery from a domestic standpoint, and the dollar has been a victim of the market's optimism over trade talks between the US and China and the lack of contagion risk over the TRY crisis - of course, markets prefer a positive outlook, as witnessed in global equity prices of late - However, the Fed is intent on its rate hiking cycle which maybe is likely to be revealed in today's minutes which may disrupt the bullish leg on Wall Street and the euro as markets get back to basics. Meanwhile, the cross hangs in the balance of a complex matrix of fundamentals at the moment and all eyes will remain on how they affect the dollar in the near term. 

EUR/GBP levels

From a technical perspective, EUR/GBP is easing back from just below the .9014/34 October and November 2017 highs and analysts at Commerzbank noted that directly below the market lies the three-month support line at 0.8916:

"The near-term risk is that we may see a retracement towards the 55 and 200 day moving averages. Below the August 14 low at 0.8896 sit the 0.8855 early August low, lies the 55- and 200-day moving averages at .8868 and 0.8825. Unexpected failure at the 0.8825 level would push the five-month support line at .8819 and the July low at 0.8799 to the fore."