EUR/GBP edged north yesterday, breaking above the resistance (now turned into support) zone of 0.9005. The pair continued trading slightly higher today, but the advance was paused slightly below 0.9065, the upper bound of the sideways range that’s been containing most of the price action since the 10th of December. Bearing in mind that the rate is still within that range, we will adopt a wait-and-see stance for now.
If the bulls are strong enough to regain momentum and drive the battle above the range’s upper bound, then we may see them aiming for the high formed on the 2nd of January, at around 0.9110. Another break above that level is likely to add a more positive spin on the pair and may set the stage for larger extensions, perhaps towards the 0.9200 area, which provided good resistance on the 7th and 8th of September 2017.
Turning our gaze to the short-term oscillators, we see that the RSI continued moving higher after rebounding from its 50 line, but now shows signs of slowing down slightly below 70. The MACD remains above both its zero and trigger lines. Although both indicators detect upside momentum, the flattening of the RSI make us cautious that a minor setback may be on the cards before, and if, the bulls decide to shoot again, perhaps for the rate to test the 0.9005 line as a support this time.
Now, in case the pair falls below 0.9005, we will remain flat as it would still be within the aforementioned range. We would like to see a decisive dip below the lower end of the sideways path, which is at around 0.8945, before we start turning bearish. Such a dip could allow the pair to slide towards 0.8885, the break of which could target our next support, near 0.8860, defined by the lows of the 29th and 30th of November, as well as the 3rd of December.
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