EUR/GBP has been trading north since Friday, when it hit the key support zone of 0.8535. Yesterday, the pair managed to emerge above the downside resistance line drawn from the peak of January 22nd, but today, it hit resistance at 0.8645 and pulled back. Despite the break above the downside line, we would like to see a move above 0.8645 before we start examining a bullish reversal as such a move would confirm a forthcoming higher high on the daily chart. For now, we will stay neutral.
If indeed, the bulls are able to push the rate above 0.8645, we could see them targeting the 0.8668 zone, which provided strong resistance on March 2nd and 3rd. If that territory is not able to halt the advance either, then we its break may carry larger bullish implications, perhaps paving the way towards the peak of February 26th, at 0.8730.
Looking at our short-term oscillators, we see that the RSI turned down from near its 70 line, while the MACD, although above both its zero and trigger lines, shows signs that it could top soon as well. Both indicators detect slowing upside speed, which suggests that a small retreat may be on the cards before the bulls regain control, perhaps for the rate to test the aforementioned downside line as a support this time.
In order to start examining whether the bears are getting back into the game, we would like to see a retreat back below 0.8577. This will also take the rate back below the downside line and may initially target once again the key support zone of 0.8535. If that hurdle is broken this time around, a forthcoming lower low would be confirmed, which could imply the continuation of the prevailing downtrend. The next area to consider as a support may be the psychological number of 0.8500.
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