EUR/GBP breaks through 0.7700 handle, drops to monthly low

Despite of strong German ZEW economic sentiment, the shared currency remained an underperformer as compared to the British Pound with the EUR/GBP cross breaking through 0.7700 handle to monthly low level.

The GBP continues to attract fresh buying interest as market participants now anticipate an increased likelihood of UK staying within the European Union. 

The slide in EUR/GBP cross is occurring despite of a strong reading of the German ZEW economic sentiment for June that surpassed even the most optimistic expectations and came-in at 19.2, the highest level since August 2015.

Meanwhile, economic data from the UK showed Public Sector Net Borrowing in May rose to £9.14 billion, which was less-than £9.5 billion expected.

Later during the day, traders will take cues from ECB President Mario Draghi's testimony before the European Parliament's Economic and Monetary Affairs Committee. Also in focus would be the Fed Chair Janet Yellen's testimony on the Semiannual Monetary Policy Report before the Senate Banking Committee, later during NY session, which could have diverging impact on the British Pound and the shared currency, and hence could provide momentum play in the EUR/GBP cross.

Technical levels to watch

From technical perspective, following a break below 0.7700 handle the pair dropped to test 0.7665 support, which now need to be taken out if bears intend to continue the pair's near-term downward trajectory. Weakness below 0.7665-60 support is likely to get extended towards retesting an important support around 0.7600 mark. On the upside, recovery attempts above 0.7700 level migth now confront a strong resistance around session high, near 0.7745-50 area. Only a strong buying interest would assist the pair to conquer this resistance and trigger a near-term short-covering bounce back towards 0.7800 handle.