EUR/GBP traded in a roller-coaster manner this week. It tumbled around 200 pips on Monday, rebounded and recovered most of the lost ground on Tuesday, but came under renewed selling interest on Wednesday. Having said that though, all this volatile activity happened below the downside resistance line drawn from the high of January 11th and thus, as long as that line remains intact, we would consider the near-term outlook to be cautiously negative.
At the time of writing, the pair is trading slightly above the 0.8575 level and if the bears are willing to stay in the driver’s seat, then we may see the latest slide extending towards the 0.8535 zone, which proved to be a decent support on February 27th and March 7th. A clear and decisive break below that level may carry more bearish implications, perhaps paving the way towards Monday’s low, at around 0.8475.
Shifting attention to our short-term oscillators, we see that the RSI turned down and just crossed back below its 50 line, while the MACD, although above both its zero and trigger lines, appears ready to obtain a negative sign soon. These indicators suggest that EUR/GBP has started gaining downside momentum again, which supports our view for some further declines.
On the upside, we would like to see a decisive close above 0.8665 before we start examining whether the bears have abandoned the battlefield, at least for a while. Such a break would confirm a forthcoming higher high on the 4-hour chart and may signal the break above the aforementioned downside line. The bulls may then aim for the 0.8710 territory, the break of which could allow them to put the 0.8740 territory on their radars. That area acted as a strong support zone from February 7th until February 19th, when it was broken to the downside.
