EUR/GBP traded lower on Tuesday, after it failed to clearly overcome the 0.8745 territory, marked by the highs of March 3rd and 4th. The rate traded briefly above that zone yesterday, but the bears were quick to reject the advance and push the pair back below 0.8745. Although EUR/GBP is trading above the short-term upside support line taken from the low of February 18th, due to the failure of the bulls to form a clear higher high, combined with the fact that the rate has distanced itself from the upside line, we will adopt a neutral stance for now.
If the bears are willing to stay in charge for a while more and push the rate below the 0.8621 level, this would signal the completion of a double top formation and may be the start of a deeper correction to the downside. The slide could then get extended towards the 0.8535 zone, the break of which may allow a test near the psychological zone of 0.8500, or the aforementioned upside line.
Shifting attention to our short-term oscillators, we see that the RSI turned down again and looks ready to fall below its 50 line, while the MACD, although slightly positive, lies below its trigger line pointing down. These indicators suggest that the rate may start picking up downside speed soon, which enhances the case for a larger correction in this exchange rate.
In order to start examining whether the prevailing trend is back in force, we would like to see a strong break above 0.8770. Such a move would confirm a forthcoming higher high and may initially pave the way towards the 0.8810 hurdle, marked by the high of October 14th. Another break, above 0.8810, may encourage the bulls to climb towards the peak of October 11th, near the 0.8870 level.
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