EUR/GBP tumbles to lows, around mid-0.8700s

   •  Italian political uncertainty prompts some fresh EUR weakness.
   •  Traders await a decisive breakthrough one-week old trading range.

The EUR/GBP cross retreated over 40-pips from session tops and dropped to fresh session lows, around mid-0.8700s in the last hour.

The cross once again failed ahead of the 0.8800 handle and was now weighed down by some fresh round of weakness witnessed in the shared currency amid the ongoing political turmoil in Italy. 

The market quickly faded early euphoria, led by the failure of an anti-establishment coalition government formation in Italy, with uncertainty over an early election prompting some aggressive selling since the early European session.

Further downside, however, remained limited on the back of a weaker tone surrounding the British Pound. Moreover, traders are likely to for a decisive break-through a broader trading range, held over the past one-week, before positioning for the next leg of directional move.

Technical levels to watch

A follow-through weakness below mid-0.8700s, leading to a subsequent drop below 0.8735 horizontal support now seems to accelerate the fall towards retesting the 0.8700 round figure mark.

On the flip side, momentum back above 0.8775-80 area might continue to confront resistance near the 0.8800 handle, which if cleared might trigger a short-covering bounce towards 0.8835-40 supply zone.