EUR/GBP: Bulls target trendline resistance through 0.85 the figure

• EUR/GBP moving towards the 0.85 handle on hot air in a technical move.
• Attention reverts to the 0.8606/10 nearby resistance according to analysts at Commerzbank. 
• Eyes on UK/EU trade negotiations, Britain wants a Canada-style agreement, (bullish for GBP if agreed).

While the economic data schedule is particularly quiet as investors look ahead to Friday's US Nonfarm Payrolls data, the price action in the euro and sterling has been pretty dramatic over the past twenty-four-hours.

EUR/USD flood gates opened below 1.10 the figure and cable has sprung a leak as well, falling from the safety net of the 1.30 handle down to a low of 1.2922. This all leaves EUR/GBP in no-man's-land while edging towards daily trendline resistance with some favourable 4-hour and daily technicals supporting the case for a test through 0.85 the figure again. 

Fundamentally, there is a risk-on profile in markets, although the bond market paints a different story.  The complacency that could be responsible for driving equities higher makes for a daunting trade by following the herd at this juncture. However, the nuts and bolts relating to the cross are somewhat more tangible as investors sit down to evaluate the road-map ahead for the UK and European trade negotiations.

UK and European trade negotiations in focus

That is not to say that anyone is any wiser of what the costs for leaving the EU will be for the UK – these are too difficult to identify – even decades into the future and there lies the risk for sterling in the near-term, something which is being reflected through the price of cable and EUR/GBP.

Moreover, we are hearing some pretty strong rhetoric from both sides, which probably suits them at these early stages of the game. However, should there be an inkling in the market that a deal similar to that of Canada's can be struck, there could be some relief priced back into the pound which should weigh heavily on the cross – Britain wants a Canada-style agreement with the EU that incorporates goods and services.

EUR/GBP levels 

"The 61.8% retracement at 0.8380 has recently held 3 times and we suspect that the market might be basing from a longer-term perspective," analysts at Commerzbank argued. 

"Attention reverts to the 0.8606/10 nearby resistance. A close above 0.8610 is needed to alleviate downside pressure and re-target the 0.8769 200 day moving average. Failure at 0.8380 will target 0.8318/78.6% retracement and the 0.8239 December low. This, together with the 55 quarter moving average at 0.8226, represents key support."