EUR/GBP has been gradually gaining ground over the past week, with the 20-day simple moving average (SMA) buffering any selling pressures on the way up and hence defending the latest rebound on the key 200-day SMA at 0.8440.
The fact that the price could not reach the upper surface of the short-term bullish channel last week is feeding some caution, though the three-month market structure is still looking somewhat encouraging as the pair has been charting higher highs since the tumble to an almost six-year low of 0.8200.
In other trend signals, the bullish intersection between the 20- and 200-day SMAs is endorsing further trend improvement. Note that the 50-day SMA is pushing for a golden crossover too.
The momentum indicators remain in the positive area but are still reflecting some conservatism among traders, making downside corrections likely.
Particularly, despite its upside reversal within the bullish area, the RSI has yet to print new higher highs, while the MACD, although hovering within the positive zone, cannot find enough strength to pierce above its red signal line.
On the upside, there is no major resistance in sight until the crucial area of 0.8594, which coincides with the 38.2% Fibonacci retracement of the 0.9228 – 0.8200 downleg.
If the bulls manage to knock down that wall, the price could continue towards the next key barrier of 0.8656, which strongly rejected upside moves during the second half of 2021.
Further up, the spotlight will shift to the 50% Fibonacci and April’s 2021 bar of 0.8715, where any sustainable extension higher would switch the broad neutral outlook to positive.
Should sellers retake control below the 20-day SMA and the 0.8500 level, the price may seek shelter somewhere between the flattening 200-day SMA and the 50-day SMA, both converging to 0.8436.
A step lower could quickly stretch towards the 0.8378 floor, while deeper, another sharp bearish correction could take place down to 0.8274.
In brief, although the short-term trend in EURGBP is showing a gradual improvement, traders may remain a bit cautious until the price successfully pierces above the 0.8587 boundary.
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