EUR/GBP consolidates last week's impressive gains, trades around 0.8650

• EUR/GBP fell sharply in the early European session.
• Retail Sales in Europe increased more than expected in February.
• BoE policymaker Silvana Tenreyro is scheduled to deliver a speech.

The EUR/GBP pair staged an impressive rally last week and gained more than 150 pips. However, the pair struggled to preserve its bullish momentum on Monday and was last seen losing 0.25% on a daily basis at 0.8650.

In the absence of significant fundamental drivers, however, EUR/GBP's drop in the early European session looks more like a technical correction rather than a reversal. Reflecting this sentiment, the latest CFTC data revealed that speculators' net long GBP positions fell to the lowest level in nine weeks.

While speaking to reporters on Monday, British Prime Minister Boris Johnson's spokesman noted that significant differences with the European Union remain despite some constructive talks. 

Earlier in the day, the data published by Eurostat showed that Retail Sales in the euro area expanded by 3% in February. Although this reading beat analysts' estimate for an increase of 1.5% it was largely ignored by market participants. 

Later in the session, Bank of England (BoE) policymaker Silvana Tenreyro will be delivering a speech.

EUR/GBP outlook

“EUR/GBP not only maintains a base above key resistance at 0.8643/65 – the 23.6% retracement of the December/April fall, highs from the second half of March and 55-day average – but with the market closing above 0.8574 on Friday a bullish reversal week has also been established to further reinforce a recovery story," said Credit Suisse analysts. 

Analysts further noted that the initial support is located at 0.8646 ahead of 0.8578. Below the latter, additional losses could be seen toward the 0.8526/21 area, where buyers are likely to show interest again.

Additional levels to watch for