EUR/GBP traded higher on Monday, after it hit support at the crossroads of the 0.8470 level and upside support line drawn from the low of April 14th. Although the recovery was stopped near the 0.8530 zone, which provided support between May 9th and 11th, the fact that the rate remains above the upside line keeps the short-term outlook positive in our view.
A clear break above 0.8530 could confirm the case of a trend continuation and may initially pave the way towards the 0.8578 barrier, which acted as a key resistance between May 6th and 10th. If that barrier doesn’t hold, its break could see scope for extensions towards the high of May 12th, at 0.8620. If the bulls are not willing to abandon the battle neither near that barrier, then a break higher could allow them to march towards the 0.8657 obstacle, marked by the high of September 29th.
Taking a look at our short-term oscillators, we see that the RSI, although below 50, has turned up and appears able to cross above that equilibrium again, while the MACD runs below zero, but it has bottomed and just crossed above its trigger line. Both indicators detect slowing downside speed and support the notion for some more advances for now. Entering bullish territories soon may add extra credence to the view of a trend continuation.
On the downside, we would like to see a clear dip below 0.8470 before we start examining the case of a bearish reversal. This could confirm the break below the downside resistance line drawn from the low of April 14th, and may initially target the 0.8425 zone, marked by an intraday swing low formed on May 5th. Another break, below 0.8425 could extend the fall towards the low of May 2nd, at 0.8370, which if doesn’t hold either and breaks, may encourage extensions towards the 0.8310 territory, marked by the low of April 22nd.
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