EUR/GBP jumps to near two-month tops, around 0.8670 region

• EUR/GBP added to the overnight strong gains and scaled higher through the mid-European session.
• Brexit woes, COVID-19 jitters weighed heavily on the sterling and remained supportive of the move.
• Stronger USD exerted pressure on the shared currency and capped gains, at least for the time being.

The EUR/GBP cross continued scaling higher through the mid-European session and shot to near two-month tops, around the 0.8670 region in the last hour.

The cross built on the previous day's bullish breakout momentum through the 100-day SMA and gained some strong follow-through traction on Tuesday amid the heavily offered tone surrounding the sterling. The impasse over the Northern Ireland Protocol of the Brexit deal has soured ties between the UK and the European Union in recent months. This, along with the resurgence of the COVID-19 infections in the UK, acted as a headwind for the British pound and provided a strong lift to the EUR/GBP cross.

In the latest developments, speaking at a parliamentary committee on Monday afternoon, the UK's chief Brexit negotiator, David Frost, said that the protocol is not sustainable in its current form and all options remain on the table to solve the issue. Lord Frost further added that the government will set out its proposals for post-Brexit arrangements for Northern Ireland on Wednesday. This could eventually have far-reaching consequences for Britain's relationship with the EU.

Meanwhile, COVID-19 cases are rising by more than 50,000 a day in the UK and hundreds of thousands of Britons are being asked to self-isolate for 10 days. In fact, the UK Health Minister Sajid Javid tested positive for COVID-19 and was in self-isolation. This also forced Prime Minister Boris Johnson and Finance Minister Rishi Sunak into quarantine. This, to a larger extent, overshadowed the UK government's decision to lift most COVID-19 restrictions on July 19.

On the other hand, the shared currency dropped to three-and-half-month lows against its American counterpart, the US dollar. This, in turn, might hold bullish traders from placing any aggressive bets around the EUR/GBP cross and keep a lid on any further gains, at least for the time being. That said, technical indicators on the daily chart maintained their bullish bias and are still far from being in the overbought territory, supporting prospects for additional gains.

Technical levels to watch