EUR/GBP pulled back in recent days, after touching a one-year high of 0.9098 on August 28. Earlier on Friday, it broke below an upside support line drawn from the lows of June 15, and if this week’s candle indeed closes below that uptrend line, then the near-term bias of the pair will have turned back to neutral, from positive previously.
Short-term momentum oscillators support the notion that the picture is turning neutral. The RSI fell below its neutral 50 line and is also pointing downwards, detecting downside momentum. Meanwhile, the MACD – although still in positive territory – lies below its red trigger line and looks to be moving lower as well.
In case of further declines, an initial line of support may be found near 0.8900, the trough of August 15. Even lower, declines may stall around 0.8855 – this being the low of August 2 – with the zone around it also encapsulating the 100-day moving average at 0.8849. If the bears pierce below it, the 0.8800 level would increasingly come into scope. A clear break below the latter territory as well would turn the near-term outlook to negative.
On the flipside, a rebound in the pair could encounter preliminary resistance around the 0.8937 area, defined by the low on August 31. An upside break could open the way for 0.9030, the zone that capped the advance on September 3. If the bulls clear that hurdle, the attention would turn to the one-year high of 0.9098. A decisive move above this barrier too would mark a higher high on the daily chart, turning the bias back to positive.
Overall, if this week’s candle closes below the aforementioned uptrend line, the pair’s near-term outlook would turn neutral. For the bias to turn negative, it would require a break below 0.8800, and to shift back to positive a move above 0.9098.
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