EUR/GBP continues to underperform for the third week in a row, touching a 7-month low at 0.8655 on Tuesday, a mark well below the Ichimoku cloud and its moving averages. In the short-term, the pair could lose more as the red Tenkan-Sen line points steeply to the downside beneath the blue Kijun-Sen line, while the MACD keeps strengthening under its red signal line in negative territory. Still, with the RSI fluctuating near the 30 oversold level, upside corrections cannot be ruled out.
A reversal to the upside could see immediate resistance around 0.8722, the 78.2% Fibonacci of the up-leg from 0.8919 to 0.9097 and a familiar support area. Slightly above the market may retest the previous peak of 0.8772 before the 61.8% Fibonacci of 0.8800 comes into view. Higher than that, the door could open for the 50% Fibonacci of 0.8857. Yet only a break above 0.8914, the upper surface of the Ichimoku cloud and the 38.2% Fibonacci, may confirm the start of an uptrend.
On the way down and below yesterday’s trough of 0.8655, bearish actions may attempt to bridge the 18-month low of 0.8619 reached on April. Should declines extend even further, support could be found around 0.8570, while if that proves a weak obstacle too, then the focus may shift down to 0.8450, both having tried to stop downside and upside movements in the past?
In the medium-term picture, the bearish outlook has deteriorated in the three-month period as the bears managed to stretch the downfall off 0.9097 to fresh troughs yesterday. The 50-day simple moving average is set to post a bearish crossover with the 200-day MA, adding evidence that the downtrend is not near to its end.
To sum-up, EUR/GBP holds a negative bias both in the short and the medium-term picture.
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