EUR/GBP was looking very soft last Friday and everybody was getting into a bearish mindset when a number of large bids appeared out of nowhere. We reported on Friday of the big bids at .8590/.8600 and the rush of cross buying as soon as Europe opened was certainly a noticeable event. I still do not think the market is particularly comfortable being long GBP against anything and that’s why we saw such a rush of short covering.
The levels to watch now are .8590/.8870 which is quite a wide range. A clean break of either will determine the next medium term move but in the meantime, play the edges.