EUR/GBP hits 5-month lows, now eyeing 0.8700 mark

   •  Renewed Brexit optimism helps GBP to regain positive traction.
   •  A goodish pickup in the shared currency does little to lend support.

The EUR/GBP cross faded an intraday spike to levels just above mid-0.8700s and dropped to near five-month lows in the last hour.

Following a knee-jerk reaction to negative Brexit comments by DUP's Donaldson, the British Pound regained traction and was now supported by some renewed Brexit optimism, following the UK Brexit Secretary Dominic Raab's hand signals.

On his way out of the cabinet, Raab's thumbs up was seen as a hint that a deal to solve the mechanism for the Irish backstop, which works for all parties, may be in the works and thus, provided a strong boost to the British Pound.

Even a modest uptick in the shared currency, helping the EUR/USD pair to quickly rebound around 35-pips from daily lows, did little to lend any support or stall the ongoing downfall to the lowest level since mid-June.

It would now be interesting to see if the cross is able to find any buying interest or continues with its near-term bearish trajectory amid absent relevant market moving economic releases, either from the UK or Euro-zone.

Technical levels to watch

Any subsequent fall is likely to find support near the 0.8700 round figure mark, below which the cross is likely to accelerate the fall towards March swing lows, around the 0.8670-65 area, en-route YTD lows support near the 0.8630-20 region.

On the flip side, the 0.8750-55 region now seems to have emerged as an immediate resistance, which if cleared might trigger a near-term short-covering bounce and lift the cross further towards retesting the 0.8800 heavy supply zone.