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- EUR/GBP falls below key technical level, GBP/EUR rate rises.

- Not much by way of support before 0.8700 (1.1495) threshold.

- Fundamentals drive decline, which is to continue for a while yet.

The Euro-to-Pound exchange rate broke below a key support level this week due to a mixture of Pound strength and Euro weakness.

Europe's single currency has fallen below the 200-day moving average, which is a strong indication of further losses to come. A daily close below this level on Friday would likely open the door to a further decline once into the new week.

The Euro has fallen after weak data from the German services sector stoked concerns about the state of the Eurozone's largest economy.

Fears for the health of the country's 385 'Sparkassen' lenders, small regional banks, have also weighed on the exchange rate.

The single currency continues to be pressured by concerns about Italy's budget deficit. Those are reflected by rising Italian government bond yields, which are a measure of the return investors are demanding to compensate them for a range of risks including that of default.

"Italian government bond yields remain within 10-12 basis points of a new multi-year high as investors fret that Italy’s huge debt pile will weigh on the government’s budget spending plans," says Nick Cawley, an analyst at DailyFX. "If yields continue to rise, the cost of servicing this debt may well prompt rating’s agencies to downgrade the country’s outlook."

The Pound, meanwhile, has gained a boost from mounting hopes that negotiators will soon reach a deal on the terms of the U.K.'s withdrawal from the EU, which would lessen the risk of a destabilising "no deal Brexit".

Above: Pound-to-Euro rate shown at daily

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Lock in Sterling's current levels ahead of potential declines: Get up to 5% more foreign exchange for international payments by using a specialist provider to get closer to the real market rate and avoid the gaping spreads charged by your bank when providing currency. Learn more hereCawley notes the EU's Donald Tusk has re-iterated that a Canada+++ deal is still on the table, which is something that was covered by Pound Sterling Live this week.

Yet Cawley says he is skeptical the EUR/GBP decline will endure without a deal actually being delivered and cites September's events in Salzburg as the reason why.

The Pound rallied on positive headlines that a deal was close to hand in the run-up to the Salzburg summit only to give back most of those gains in just a day following the EU's rejection of Theresa May's proposal.

The same could happen again this time. However, overall, Cawley says risks are tilted to the downside for EUR/GBP and a continuation of the ongoing 6-week decline is likely.

Above: Euro-to-Pound rate shown at daily intervals.

There is little in the way of support below the current market level of 0.8824 (1.1330 GBP/EUR) until the exchange rate gets to 0.8700, which is 120 points below the current price level and equal to 1.1495 for the Pound-to-Euro pair. The 0.87 threshold is a well-established floor from earlier in the year while 1.1495 is a ceiling for GBP/EUR.

"The six-week downtrend is also intact with little in the way of support before 0.8700 (1.1495). Below here the April low of 0.86207 (1.1599) comes into play and this looks likely to be tested if positive Brexit rumors and talk are confirmed over the next two weeks," says Cawley.

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Lock in Sterling's current levels ahead of potential declines: Get up to 5% more foreign exchange for international payments by using a specialist provider to get closer to the real market rate and avoid the gaping spreads charged by your bank when providing currency. Learn more here