EUR/GBP traded lower on Wednesday, after it got rejected by the 0.8609 level, near the downside resistance line drawn from the high of April 30th. As long as the pair continued to trade below that line, we would consider the near-term outlook to be cautiously negative.
A decisive break below Monday’s low, at 0.8566, could wake up more bears, who could get encouraged to drive the action down to the low of June 23rd, at around 0.8530. That said, the move that would signal the resumption of the prevailing downtrend is a dip below that support. This would confirm a forthcoming lower low and may pave the way towards the 0.8493 territory, marked by the low of April 1st.
Taking a look at our short-term oscillators, we see that the RSI turned down and fell back below its 50 line, while the MACD, although positive, lies below its trigger line, pointing south as well. It could also turn negative soon. Both indicators suggest that the pair may have started gaining downside speed again, which supports the notion for further declines, at least in the short run.
In order to abandon the bearish case, we would like to see a rebound back above 0.8609. This move would not only take the rate above the aforementioned downside line, but would also confirm a forthcoming higher high. The bulls may then get encouraged to push the battle towards the high of June 15th, at around 0.8628, the break of which may carry extensions towards the high of June 1st, near 0.8645. If that obstacle does not hold either, then we may see the pair climbing towards the 0.8671 area, defined as a resistance by the high of May 25th.
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