EUR/GBP came under strong selling interest yesterday, after it hit resistance slightly below the 0.8730 level, near the short-term downside resistance line drawn from the peak of the 12th of March. Then, the pair hit support at 0.8645, near the lower end of the medium-term downside channel that’s been containing the price action since late September, and subsequently, it rebounded somewhat. Nevertheless, the bears regained control during the European morning Friday, and this time, they managed to drive the battle below the aforementioned channel’s lower bound.
A potential daily close below that bound, which would also signal the close of the week, could be a sign for further declines in the foreseeable future. For now, we expect the bears to initially aim for the 0.8610 support territory, the break of which may carry extensions towards the 0.8570 zone, defined by the low of the 19th of May 2017.
Our short-term oscillators detect accelerating downside speed and corroborate our view that EUR/GBP may be poised to continue trading lower. The RSI, already below 30, has turned down again, while the MACD lies below both its zero and trigger lines, pointing south as well.
On the upside, a move back above 0.8670 would bring the rate back within the pre-mentioned medium-term channel, but even if this is the case, we see a decent likelihood for the sellers to take charge again near the crossroads of the 0.8700 zone and the short-term downside resistance line. We would like to see a clear move above that line before we get confident that more bullish extensions are in the works. Such a break may initially pave the way for our next resistance of 0.8730.
Article written by Charalambos Pissouros, Senior Market Analyst at JFD Brokers.
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