EUR/GBP Tumbles Below 0.8775; Looks to be Heading for the 0.8735 Zone

EUR/GBP collapsed during the European morning Monday, breaking below three support (now turned into resistance) barriers in a row. Currently, the rate is trading below the 0.8775 hurdle and looks to be heading towards the 0.8735 zone, defined by the low of the 8th of February. The latest short-term downtrend has started after the rate hit the upper bound of a medium-term downside channel that’s been containing the price action since the 15th of September. What’s more, last Friday, the bears managed to drive the battle below the prior upside support line taken from the low of the 25th of January. Having all these in mind we believe that the short-term outlook remains negative.

If the bears manage to stay in the driver’s seat, then we expect them to aim for the 0.8735 territory soon. A clear break below that support zone is possible to extend the decline towards our next support of 0.8715, marked by the low of the 1st of February.

Looking at our short-term oscillators, we see that the RSI fell below its 30 line, while the MACD lies below both its zero and trigger lines. These indicators detect strong downside speed and corroborate our view that the pair is poised to continue trading south in the near term.

On the upside, a break above 0.8785 could aim for the crossroads of the 0.8805 level and the short-term tentative downtrend line taken from the peak of the 8th of March. That said, even if such a rebound occurs, as long as it remains below the short-term downtrend line, we would treat it as a corrective move. We would like to see a clear move above that line and the 0.8805 level in order to take the sidelines.