EUR/GBP limited below 0.9050, dives below 0.9000

• EUR/GBP turns down from 0.9050 and returns below 0.9000.
• The pound appreciates against the euro as risk appetite increases.
• EUR/GBP: Bearish pressure grows for a retest of 0.8913 – Credit Suisse.

Euro's upside attempt has been capped at 0.9050 area again on Monday before pulling back, extending its retreat below 0.9000 with the GBP appreciating on the back of Pfizer’s vaccine’s news.

GBP appreciates on COVID-19 vaccine hopes

The pound has been buoyed by the broad risk appetite triggered by the release of the first results of Pfizer’s COVID-19 vaccine and has rallied more than 0.5%, sending the euro back below 0.9000.

The drugmaker announced earlier today that the tests of its coronavirus vaccine reveal that it is 90% effective. The market has reacted with a risk appetite boost that has sent equity markets surging. The Dow Jones Index is trading 4.25% higher while the main European Indexes have closed with advances from 4% to 8%.

On the other hand, the stalemate on the Brexit negotiations is keeping GBP longs in check. The lack of relevant progress after two weeks of intensive negotiations remains weighing on the pound although the talks are still going on and the market remains fairly optimistic about a last-minute deal that will avoid an unorderly exit from the EU.

EUR/GBP: Bearish pressure grows for a retest of 0.8913 – Credit Suisse

From a technical perspective, the FX strategy team at Credit Suisse sees the risk skewed to the downside, with the pair likely to test 0.8913: “EUR/GBP remains below its 13 and 55-day averages and has now not only seen a clear break of key price support from the lows of the past two weeks at 0.9009/05 but now also trend support from late September and briefly its uptrend channel from late April. Our bias stays lower for a clear break here to increase the risk we are seeing a more important topping process with support seen next at the 200-day average at 0.8913.” 

Technical levels to watch