On March 22nd, EUR/GBP broke above the downside resistance line drawn from the high of January 22nd. However, the bears were quick to regain control and push the rate back below that line on March 25th. Today, the rate fell below the psychological zone of 0.8500, confirming a forthcoming lower low, which combined with the fact that it is also trading below all three of our moving averages on the 4-hour chart, paints a negative near-term picture.
We believe that now the rate may be headed towards the 0.8460 area, defined as a support by the low of February 7th, 2020, the break of which may pave the way towards the low of February 27th of that year, at around 0.8433. If that barrier is not able to halt the slide either, then we may experience extensions towards the 0.8407 hurdle, marked by the inside swing high of February 24th.
Shifting attention to our short-term oscillators, we see that the RSI just touched its toe below its 30 line, while the MACD, already negative, has just crossed below its trigger line. Both indicators suggest that the rate’s downside speed is accelerating again, which supports the notion for further declines.
In order to abandon the bearish case and start examining a bullish reversal, we would like to see a break above the high of March 29th, at 0.8563. The rate would already be above the aforementioned downside resistance line and may initially target the 0.8604 zone, where another break may encourage the bulls to push the battle towards the 0.8645 area, which provided strong resistance between March 23rd and 25th.
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