EUR/GBP selling to lose steam; downtrend to stay in place.
EUR/GBP recovered a little after taking the shape of a Doji near a 6 ½-month trough of 0.8620 on Monday.
In momentum indicators, the RSI bounced off its 30 oversold level, denying to register a new lower low at a time when the MACD continues to strengthen its positive momentum in the negative territory, both suggesting that the selling pressure is losing steam.
Trend signals, however, remain negative as the market price is still below all its simple moving averages (SMAs) and well under the red Ichimoku cloud, hinting that the downward direction may stay in place for now.
The 0.8600 level and the 20-day SMA are currently viewed as an immediate resistance to upside corrections. Slightly higher, the 0.8655 number proved a reliable barrier and will also be closely watched by traders who are more interested to see a decisive rally above the 23.6% Fibonacci of 0.8710 of the 0.9323-0.8520 bearish wave. Should buying pressure persist, the 38.2% Fibonacci of 0.8826 could be the next target.
On the downside, there are several tough obstacles to pass through. The 6 ½-month low of 0.8520 and the March bottom of 0.8470 are expected to halt selling pressures ahead of the 0.8400 level. Beneath the latter, 0.8300 is another key support area to keep in mind in case sharper declines take place.
Looking at the three-month window, the negative sentiment worsened as the price extended its downtrend, with the bearish cross between the 50- and 200-day SMAs reducing the odds for an outlook reversal.
Summarising, downside pressure may soften in the short-term, while in the medium-term picture, the downtrend is likely to hold.
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