EURGBP has mostly been trading between the 23.6% and 50% Fibonacci retracement levels of the September-December 2022 downtrend over the past three months, but the lower bound of that range came under attack on Wednesday. Sellers swarmed into the market after the 20- and 50-day simple moving averages (SMA) caved in on the price.
The 20-day SMA is in the process of crossing below the 50-day one, while the Tenkan-sen and Kijun-sen lines of the Ichimoku cloud are sloping downwards too, pointing to an increasingly bearish bias. The momentum indicators are underlining the short-term negative picture. The stochastics are converging on the 20 oversold mark and the RSI is diving deeper below 50.
Immediate support comes at the 23.6% Fibonacci of 0.8712, which hasn’t been tested since mid-to-late December. A drop below it would instantly bring into view the 200-day SMA 0.8677, after which, the December 1 low of 0.8546 would be eyed by the bears.
However, if the sideways range holds and the price bounces off the 23.6% Fibo, a difficult battle lies to the north. The entire zone around the 38.2% Fibonacci of 0.8815 is surrounded with obstacles. Particularly, the 20- and 50-day SMAs and the cloud top at 0.8858. Even if these barriers are cleared, the 50% Fibonacci just below 0.8900 that forms the upper bound of the range could prove difficult to overcome. Not to mention the February top of 0.8978, which coincides with the 61.8% Fibonacci.
In brief, a break below the range’s lower bound would increase the risk of the neutral medium-term outlook turning bearish, and only a climb above the February top can sustain the weak positive trend in the longer run.
