EUR/GBP faces rejection near 0.8800 handle, tumbles to fresh lows in over two-months

The EUR/GBP cross drifted into negative territory for the third consecutive session and dropped to its lowest level since mid-August.

Currently trading around mid-0.8700s, the pair's attempted tepid recovery move faced rejection near the 0.8800 handle as the shared currency continues to be weighed down by the German election setback. 

Meanwhile, the latest leg of slide since early European session could also be attributed to the British Pound's relative outperformance. The Sterling gained some traction after the Confederation of British Industry (CBI's) latest survey of the UK retailers and wholesalers revealed that the UK retail sales for the month of Oct. rose to the highest levels since Dec 2016.

However, the lack of progress in Brexit negotiations, with both sides still far apart on key issues might now contribute towards limiting further downslide, at least for the time being. 

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With a fall of over 550-pips over the past five week, technical indicators have been gradually drifiting into near-term oversold territory. Hence, bears are likely to take breather, with the cross more likely to enter a bearish consolidation phase. 

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Technical levels to watch

A follow through weakness is likely to find support near the very important 200-day SMA, near 0.8720 region, which if broken would turn the pair vulnerable to break below the 0.8700 handle and head towards its next support near 0.8655 level.

On the upside, the 0.8800 handle now seems to have emerged as immediate resistance, above which a bout of short-covering could lift the cross back towards 0.8835 intermediate hurdle ahead of 0.8875-80 strong supply zone.