EUR/GBP traded lower on Tuesday, breaking below the support (now turned into resistance) barrier at 0.8810. Following the downside exit of the sideways range that was containing most of the price action since the 7th of December, the pair has been trading in a short-term downtrend, marked by a downside line drawn from the high of the 11th of January. Thus, we would consider the near-term outlook to still be negative for now.
We believe that the dip below 0.8810 may have opened the door for another test near the 0.8765 area, near Thursday’s lows, but if the bears prove strong enough to overcome that hurdle this time, we may see them aiming for the 0.8740 zone. Another move lower, below 0.8740, may carry more bearish implications, perhaps paving the way for the low of the 14th of November, at around 0.8675.
Shifting attention to our short-term oscillators, we see that the RSI, already below 50, has turned down again, while the MACD lies within its negative territory and looks ready to fall back below its trigger line. These indicators detect downside momentum and amplify the case for the rate to continue drifting south for a while more.
In order to abandon the bearish case and take the sidelines, we would like to see a move above 0.8830. Such a move may confirm the break above the aforementioned downside line and could allow a recovery towards the 0.8860 or 0.8880 zones. That said, we would start leaning to the bullish side only if the latter level is broken. Such a move may allow the buyers to pull the rate up towards the 0.8945 zone, which acted as the lower end of the sideways range within which the pair was trading from the 7th of December until the 11th of January.
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Copyright 2019 JFD Group Ltd.