Technical Analysis – EURGBP halts decline below trendline

Christina Parthenidou, XM Investment Research Desk

EURGBP could not sustain strength above the ascending trendline that seems to have adopted a resistance role following its downside violation, with the price retreating slightly below the 0.9000 level on Monday.

The 38.2% Fibonacci of the 0.9497-0.8670 downleg came immediately to the rescue thereafter, helping the pair to rebound near 0.8980 and hold above its previous low of 0.8937, a break of which would raise concerns about the short-term upward pattern.

From a technical perspective, the short-term bias is currently viewed as neutral-to-positive as the RSI is trying to cross above its 50 neural mark and the Stochastics are set to head north following the bullish cross in the oversold area.

The price, though, may need to rise above the middle Bollinger band, which is also the 20-day simple moving average (SMA), and close above the 50% Fibonacci of 0.9080 in order to reach the trendline and its recent highs registered between 0.9147 and 0.9175. Should buyers persist, the price may seek a new higher high around 0.9290.

Otherwise, if the bears resurface, driving the pair below the 0.8937 trough, the door would open for the 23.6% Fibonacci of 0.8860. Breaching that barrier, the next stop could be somewhere between 0.8780 and the 200-day SMA currently at 0.8740.

In brief, EURGBP could maintain a neutral mode unless it rallies above the trendline and the 0.9140 level or tumbles below 0.8937.