EUR/GBP finds support at 0.8900 handle after UK data

Having clocked a seven-year peak of 0.9262, led by a flash crash in the British Pound, the EUR/GBP cross retraced from multi-year highs and is now trading around mid-0.8900s. 

Friday's release of disappointing industrial production and larger-than-expected trade deficit from the UK provided little respite for the British Pound. UK industrial production unexpectedly contracted by 0.4% m-o-m during August and primarily led by lower-than-expected 0.2% growth in manufacturing production, which constitutes around 80% of total industrial production. Meanwhile, UK goods trade balance for August bulged to £12.112 billion as compared to July's £9.506 billion and £11.30 billion expected.  

Friday's sharp upsurge could be attributed to comments from French President Francois Hollande that accentuated the "hard Brexit" worries and sent sterling tumbling lower across the board. Moreover, possibility of big stops getting triggered and (or) a fat finger order, amid thin market liquidity during transition period from the US to Asian session, could have further aggravated the move.

Market focus now turns to the US monthly jobs report, which would trigger a fresh bout of volatility in the FX market and eventually provide fresh impetus for the EUR/GBP cross. 

Technical levels to watch

From current levels, 0.8900 handle, marking 38.2% Fibonacci retracement level of 0.8333-0.9262 recent leg of up-move, is likely to act as immediate support below which the reversal could get extended towards 0.8840 (session low support) ahead of 50% Fibonacci retracement level support near 0.8800 handle.

Meanwhile on the upside, bullish momentum back above 0.9000 psychological mark might confront resistance near 23.6% Fibonacci retracement level near 0.9040 level, which if cleared could lift the cross back beyond 0.9200 mark.