EUR/GBP advances to 2020 highs near 0.8770

• EUR/GBP moves further north of the 0.8700 mark.
• The cross is now challenging the 200-day SMA near 0.8740.
• German Industrial Production surprised to the upside in January.

The continuation of the upside bias in the single currency has lifted EUR/GBP to the area of fresh 2020 highs in the 0.8765/70 band earlier on Monday.

EUR/GBP stronger on firm euro, data

The cross has started the week on a positive footing, leaving behind Friday’s pullback and advancing to new yearly highs in the proximity of 0.8770. The daily upside is now flirting with the critical 200-day SMA in the 0.8740 region.

In fact, the continuation of the sell-off in the greenback has been lending extra legs to the euro and the quid, therefore allowing the cross to reverse the recent decline.

Moving forward, the attention will be on the ECB event on Thursday, with market participants expected to closely follow the views from the Governing Council in regard to potential measures aimed to tackle the negative effects of the coronavirus outbreak on the economy of the region, particularly in light of the recent measures by the RBA, the BoC and the Fed.

On another front, the developments from the COVID-19 have eclipsed any news on the EU-UK trade negotiations, which are expected to dictate the mood around the cross (especially in the sterling) in the upcoming months.

Further out, cross found extra support earlier in the session after German Industrial Production expanded more than forecasted at a monthly 3.0% during January, fuelling the view that the sector could now embark on a more serious rebound. In addition, the German trade surplus shrunk a tad in January to €18.5 billion and the EMU’s Sentix Index dropped to -17.1 for the current month.

EUR/GBP key levels

The cross is up 0.94% at 0.8727 and faces the next hurdle at 0.8766 (2020 high Mar.9) seconded by 0.8800 (50% Fibo of the August-December 2019 drop) and then 0.9019 (monthly high Oct.10 2019). On the downside, a drop below 0.8621 (low Mar.5) would expose 0.8595 (monthly high Jan.14) and finally 0.8515 (100-day SMA).