Technical Analysis – EURGBP bearish bias enhanced by capping Ichimoku cloud
- Anthony Charalambous
EURGBP's positive impetus, which evolved from the vicinity of the 200-period simple moving average (SMA) at 0.8406, is trading around the 100-period SMA at 0.8473 after fading from the lower surface of the Ichimoku cloud. The cloud has revived the more than one-week decline from the seven-and-a-half-month peak of 0.8618, something which the rolled over 50-period SMA is also endorsing.
The Ichimoku lines are suggesting that downside risks remain active, while the positive message from the short-term oscillators appears somewhat shaky. The MACD, in the negative region, is climbing above its red trigger line, while the RSI is flirting with the 50 neutral threshold. The positive charge of the stochastic oscillator is also in question as the stochastic lines are residing at the 80 overbought mark.
If positive forces continue to evaporate and the pair retreats beneath the 100-period SMA at 0.8473, sellers may then encounter downside friction around the red Tenkan-sen line at 0.8443 and the 0.8433 level, which is the 50.0% Fibonacci retracement of the up leg from 0.8249 until 0.8618. Remaining skewed to the downside, the bears could then challenge the tough support section from the 200-period SMA at 0.8406 until the 61.8% Fibo of 0.8390, an area that also includes the valid trough of May. Sinking beneath the 61.8% Fibo mark would boost the descent in the pair, with the price weighing on the 0.8360-0.8371 support border that stretches back to mid- April.
In the positive scenario, initial heavy resistance exists between the cloud’s lower surface at 0.8492 and the 0.8505 level. Should the bulls push even higher, they may then tackle a resistance zone linking the 50-period SMA at 0.8519 with the 0.8533 barrier. From here, if positive developments in the pair endure and pilot beyond the 0.8555 mark, traders’ attention could then shift to the resistance band, moulded by the 0.8611 inside swing low in September 2021 and the October 2021 high of 0.8623.As things stand, EURGBP gains are being curbed by the Ichimoku cloud, while downside risks linger in the background. For another deep retracement to be avoided, the bulls would need to thrust the price north of the 0.8533 high.
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