EURGBP hit another fresh high today, climbing to 0.9087 – its loftiest since October 2016. The pair has been ranging in an upward linear regression channel since mid-April and prices are currently in the upper channel, underlining the bullish bias in the near term.
Despite having some way to go before reaching the upper band of the regression channel, EURGBP has met some resistance at the 161.8% Fibonacci retracement level of the downleg from 0.8948 to 0.8742. The 161.8% Fibonacci level around 0.9075 is slightly below today’s 10-month peak of 0.9087.
Momentum indicators reinforce the positive bias but suggest a short-term correction may be nearing. The RSI has just crossed the 70-overbought level, while the %K and %D lines of the stochastic oscillator are both above 80. However, the %K and %D lines are still rising and not made a bearish crossover, indicating it’s too soon to say that the current uptrend is running out of steam.
A continuation of the current rally should see the pair challenging the key 0.91 level before it finds resistance around the 0.9140 area. A successful break above 0.9040 would bring into scope October’s 7-year high of 0.9260.
In the event of a downside reversal, support should come from the middle of the linear regression channel, currently around 0.9025. A drop into the lower channel would signal a weakening of the positive bias with support being provided by the 100% and 78.5% Fibonacci levels at 0.8950 and 0.8900 respectively.
Looking at the medium-term picture, EURGBP has been bullish following the golden cross of the 50- and 200-day moving averages in June after a period of consolidation.
