EUR/GBP traded in a consolidative manner today, staying between the 0.8945 support and the resistance of 0.8970. That said, since Tuesday, the pair has been trading below the prior upside support line drawn from the low of April 30th, while also staying below the downside resistance line taken from the high of June 29th. What’s more, it is trading below all three of our moving averages on the 4-hour chart. With all these technical signs in mind, we would consider the short-term outlook to be negative for now.
Nonetheless, in order to start examining further declines, we would like to wait for a dip below 0.8945. Such a break may encourage the bears to dive towards the 0.8910 support, marked by the low of June 16th. They may decide to take a break after testing that zone, thereby allowing the rate to correct higher. However, as long as such a bounce stays limited below the downside line taken from the high of June 29th, we would expect the bears to take charge again and perhaps push the action below 0.8910. This may set the stage for extensions towards the 0.8865 area, defined as a support by the lows of June 2nd and 9th.
Looking at our short-term momentum studies, we see that the RSI lies near its 30 line, but it is flat, while the MACD, although below both its zero and trigger lines, has flattened as well. Although both indicators detect negative momentum, they also suggest that the momentum has started fading somewhat. Thus, this is another reason why we prefer to wait for a dip below 0.8945 before we get confident on further declines.
Before we start assessing whether the outlook has changed to a positive one, we prefer to wait for a recovery above 0.9065. The rate would already be back above the prior upside line taken from the low of April 30th, something that may encourage the bulls to shoot for the 0.9100 zone. Another break, above 0.9100, may extend the advance towards the peak of June 30th, at 0.9145.
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