• EUR/GBP met with fresh supply on Monday and retreated further from the 0.8920-25 supply zone.
• The disappointing German IFO survey results failed to provide any meaningful impetus to the cross.
• Any subsequent fall is more likely to remain limited and might be seen as an opportunity for bulls.

The EUR/GBP cross edged lower through the early European session and dropped to fresh daily lows, around the 0.8875 region in the last hour.

The cross witnessed some selling on the first day of a new trading week and extended the previous session's retracement slide from the 0.8920-25 supply zone. The intraday downtick lacked any obvious fundamental catalyst and is more likely to remain limited, instead could be seen as a buying opportunity.

The UK macro data released on Friday added to worries about a slowdown in the economic activity. This comes amid reports that the new UK COVID-19 variant was perhaps more deadly than the original strain. This, in turn, might hold the GBP bulls from placing any aggressive bets and extend some support to the EUR/GBP cross.

On the other hand, the shared currency was underpinned by last week's hawkish tweak by the European Central Bank (ECB) on the Pandemic Emergency Purchase Program. The ECB President Christine Lagarde said on Thursday that the central bank might not need to exhaust the €1.85 trillion PEPP envelope if favourable financing conditions can be maintained.

The euro found additional support from a weaker tone surrounding the US dollar and seemed rather unaffected by disappointing German IFO survey results. In fact, the headline Business Climate Index fell more than anticipated to 90.1 in January from 92.2 previous. Adding to this, the IFO Current Assessment and Expectations Index also misses consensus estimates.

Market participants now look forward to scheduled speeches by the ECB policymaker Weidmann and President Christine Lagarde for a fresh impetus. Apart from this, comments by the BoE Governor Andrew Bailey, coupled with developments surrounding the coronavirus saga might influence the British pound and produce some trading opportunities around the EUR/GBP cross.

Technical levels to watch