EUR/GBP traded lower on Wednesday, after hitting resistance at 0.8435. However, the pair continues to trade above the upside support line drawn from the low of April 14th, which keeps the chances of a rebound alive. That said, there is also another shorter-term line, a downside one, drawn from the high of April 26th, and thus, as long as the pair trades between those two diagonal lines, we will hold a flat stance.
We will get more confident on the upside upon a break above 0.8435. This may confirm the break above the short-term downside line taken from the high of April 26th, and may allow advances towards that peak, at around 0.8465. If the bulls are not willing to stop there, then a break higher could carry larger bullish implications, perhaps paving the way towards the high of March 31st, at 0.8512.
Taking a look at our short-term oscillators, we see that the RSI, although above 50, turned down and got back near that equilibrium line, while the MACD, lies near both the zero and trigger lines, pointing sideways. In our view, this points to lack of directional momentum and adds more credence to our choice of standing pat for now.
On the downside, we would like to see a clear dip below 0.8370 before we start examining the bearish case. The rate will already be below the upside line drawn from the low of April 14th, and it will also confirm a forthcoming lower low on both the 4-hour and daily charts. The bears may then get encouraged to dive towards the low of April 22nd, at 0.8310, the break of which could extend the fall towards the 0.8280 zone, near the lows of April 19th and 20th.
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