EURGBP recently broke below the .7100 key support level, indicating that sellers are ready to push the pair lower. 

Price is pulling back to the broken support area which lines up with the 38.2% Fibonacci retracement level and might keep further gain in check.

However, stochastic hasn’t quite reached the overbought territory, which means that a higher correction is possible. RSI is also on the move up, which suggests that buyers are still in control of price action. EURGBP could climb up to the 61.8% Fibonacci retracement level near the .7200 to .7250 levels and the falling trend line connecting the recent highs.

Once the selloff resumes at any of the Fib levels, price could head back to its former lows near the .7000 major psychological level or lower. On the other hand, an upside break past the 61.8% Fib or the trend line could show that further gains are in the cards.

The main event risk for this setup is the IMF deadline for Greece, during which the country has to pay 1.6 billion EUR in debt repayments. If they fail to meet this obligation, they could wind up paying in arrears or eventually defaulting on their loan. This could prompt speculations of a Grexit and instability for the shared currency.

As for the UK, the current account balance and final GDP readings are up for release today. Strong data could renew demand for the pound, especially since the BOE is one of the more hawkish central banks out there, next to the Fed.

Data lined up from the euro zone includes the German retail sales and unemployment change data, along with the headline and core CPI estimates from the region. Positive readings could keep the euro afloat, although traders might be more tuned in to developments in Greece rather than economic data.

By Kate Curtis from Trader’s Way