HomeContributorsTechnical AnalysisEURGBP Heads Lower; Support at 20-day SMA

EURGBP Heads Lower; Support at 20-day SMA

  • EURGBP extends its pullback from 4-month high
  • Mildly bearish bias in the near term
  • But plenty of support at 20-day SMA and uptrend line

EURGBP has been gradually edging lower after scaling a four-month high in late September. The momentum indicators are mixed as the RSI has flatlined slightly above the 50-neutral level but the MACD just crossed below its red signal line.

If the bearish pressure intensifies, the pair could soon test the crucial support zone in the 0.8630 region encompassing the 20-day simple moving average (SMA) and the short-term ascending trendline. A break lower would bring into the spotlight another set of moving averages – the 100- and 200-day SMAs, which are converging around the 0.8600 level. Should prices breach this support too, there might be nothing stopping the plunge until the August low of 0.8492.

However, if EURGBP is able to bounce off the 20-day SMA, there’s likely to be some friction around the 38.2% Fibonacci retracement of the February-August downtrend at 0.8677. Overcoming this would open the way for the 200-day SMA slightly above the 0.8700 mark. Higher up, the 50% Fibonacci of 0.8735 is significant as a climb above it would strengthen the bulls, putting the uptrend on a more sustainable path.

In brief, the near-term picture could easily turn bullish again if EURGBP holds above its ascending trendline and can then successfully tackle the 200-day SMA. However, a slip below the trendline would shift the focus back to the downside.

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