EUR/GBP traded lower during the European morning Friday, after it hit resistance near the 0.8925 level. The pair has been in a retreat mode since Wednesday, when it tested the crossroads of the 0.8965 barrier and the upper bound of the medium-term downward sloping channel that has been containing the price action since the 15th of September.
Taking into account the aforementioned test and the subsequent retreat, we believe that the bears are likely to remain in the driver’s seat and perhaps challenge the 0.8885 support soon, marked by the low of the 5th of March. That said, we would like to see a decisive dip below 0.8875 before we get confident on larger bearish extensions. Such a break could set the stage for our next support zone of 0.8840.
Our short-term oscillators enhance the case for the rate to continue drifting lower. The RSI crossed below 50 and looks to be heading south, while the MACD, already below its trigger line, appears ready to obtain a negative sign soon. What’s more, there is negative divergence between both these indicators and the price action.
On the upside, a move back above 0.8925 could encourage the bulls to target once again the 0.8965 level, or the upper bound of the aforementioned medium-term channel. However, we would like to see a decisive close above that territory before we get confident that the outlook of this pair has turned somewhat positive. Such a break could initially aim for the psychological round figure of 0.9000.
