EURGBP started the new month on the negative side, extending its weakness below a broken dashed ascending trendline to an almost three-month low of 0.8887 on Tuesday.
The next key support is expected to occur slightly lower around the 23.6% Fibonacci retracement of the 0.9497-0.8670 downleg at 0.8864, with technical indicators reflecting that bearish forces have not faded yet. The 20-day simple moving average (SMA) has crossed below the 50-day SMA, while the Stochastics are still looking for a turning point within the oversold area at a time when the RSI continues to ease towards its 30 oversold mark. The MACD is another negative signal as it keeps decelerating below its zero and signal lines.
In the event the price drops below 0.8860, the 200-day SMA currently at 0.8780 could come to the rescue, deterring the market from testing May’s trough of 0.8670. A successful break below the latter could confirm additional losses, probably towards the 0.8573-0.8500 zone.
Should the bulls take over, the 0.8980 level, where the 20-day SMA and the 38.2% Fibonacci are currently ready to intersect each other, could be the first target. Slightly higher, the resistance trendline drawn from February’s top of 0.9497 is a more important barrier to overcome and could be the trigger for a steeper upside correction. In this case it would be interesting to see if the 50% and 61.8% Fibonacci levels at 0.9080 and 0.9181 respectively can block the rally towards the 0.9290 restrictive territory.
Meanwhile in the medium-term picture, a decisive close above 0.9497 or below 0.8670 is required to adjust the neutral outlook accordingly.
In brief, EURGBP is viewed as bearish in the short-term, with the focus turning next to 0.8864. Bullish pressures could strengthen above the trendline.
