As the final trading quarter of 2017 gets under way, there are speculations that the incredible EURGBP rally could be losing steam, which is understandable, especially when considering how the pair ended Q3, declining over 500 pips from the 0.9300 resistance level.

Renewed risks of political instability in Europe

While the return of political risk in Europe has played a role in the currency pair’s decline, firmly hawkish comments from Bank of England policy makers in September, inspired sellers to push prices back towards 0.8750.

Renewed risks of political instability in Europe are likely to continue pressuring the Euro, while ongoing Brexit uncertainty has severely bruised buying sentiment towards Sterling.

With the fundamental drivers behind the EURGBP starting to conflict, the currency pair could find itself bouncing within a wide range, as investors juggle with the various themes.

Quantitative Easing by ECB

Although expectations continue to mount over the European Central Bank tapering QE, as Europe’s economic conditions improve, there is a threat of political risk and concerns over low inflation obstructing the central bank’s efforts.

Meanwhile, in the United Kingdom, the unsavoury combination of political instability, soft economic fundamentals and Brexit uncertainty, has raised questions over the Bank of England’s ability to raise UK interest rates.

Investors will be closely watching to see if the central bank raises rates in Q4 in an effort to tame inflation, or whether it will be forced to remain on standby, amid Brexit uncertainty.

All in all, the EURGBP could be in store for another eventful and unpredictable quarter, with the main drivers remaining political risk and monetary policy speculation.

Technical Side of EUR

Taking a look at the technical picture, the EURGBP is under some pressure on the weekly and monthly timeframe, with 0.9300 acting as a ceiling.

The heavily bearish monthly close in September is likely to encourage bears to launch fresh rounds of selling, with 0.8700 the first level of interest.

On the daily charts, the currency pair looks to be in the process of a technical bounce towards the 0.9030 50% Fibonacci retracement level.

Although the previous lower high at 0.8880 has been broken, technical lagging indicators such as the daily MACD and 20 Simple Moving Average still point to further downside.

A daily close back below 0.8890 may open a path towards 0.8820 and 0.8750, respectively.

Traders will continue to pay very close attention to the broken bullish channel, on the weekly timeframe.

While a weekly break below 0.8850 could encourage bears to target 0.8650, the current technical bounce could extend further if prices find comfort above 0.9000.

Monthly bears need to secure a close below 0.8700 to open a path lower towards 0.8500 and 0.8300, respectively.