EUR/GBP recovers from monthly lows, turns positive at 0.7675

The EUR/GBP cross is attempting a tepid bounce from session low, pausing its five-day losing streak, but still remained well below 0.7700 handle and is currently trading around session peak level of 0.7675.

After rising to the proximity of 0.8000 psychological mark, the British Pound gained traction after recent poll results pointed towards support leaning in favor of the 'Remain' camp and resulted into a sharp decline of nearly 350-pips for the EUR/GBP cross in just 4-trading session. The current market condition seems to be pricing-in a possible win for the 'Remain' camp, thus increasing the prospects of a knee-jerk reaction if 'Leave' vote take the lead.

On Tuesday, the cross did attempt a recovery to 0.7745 region on upbeat 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. The up-move, however, got sold into after the ECB President Mario Draghi raised concerns over low inflationary (deflationary) environment and showed central bank's readiness for additional stimulus measures.

Going forward, developments surrounding the upcoming UK-EU referendum would continue to drive sentiment and would influence the EUR/GBP cross.

Technical levels to watch

The pair is rebounding from an intermediate support near 0.7655-50 and a follow through buying interest beyond 0.7685-90 resistance seems to assist the pair back towards Tuesday’s high resistance around 0.7745-50 region. The momentum could further get extended towards its next major resistance around 0.7800 round figure mark.

Conversely, weakness below 0.7655-50 support is likely to accelerate the slide immediately towards 0.7600 handle before the pair drops back to May swing lows support near 0.7565-60 area and extends its weakness further towards its next major support near 0.7525 level, marking Feb. lows.