EURGBP Breaks Long-Term Sideways Range to the Downside

Technical analysis of Forex market

EURGBP fell to a fresh 21-month low of 0.8530 earlier this week, violating to the downside the sideways range it had been trading in since late 2017, with an upper bound at 0.9100 and a lower bound near 0.8615. The medium-term outlook thus looks negative, especially since price action is taking place below a downtrend line drawn from the highs of January 3, and also below the 50- and 200-day simple moving averages (SMAs).

Short-term momentum oscillators, however, suggest the latest rebound may continue for a while as the RSI has exited its oversold territory and is pointing up, while the MACD seems to be trying to find a bottom.

Further advances in the pair could encounter immediate resistance near 0.8615, with an upside break opening the door for a test of the 0.8730 area and the downtrend line. If the bulls pierce above this zone too, that would turn the short-term outlook to a more neutral one, with the next obstacle being the 50-day SMA at 0.8810.

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On the flipside, if the bears retake control, they could initially challenge the 0.8530 hurdle. A clear break below that territory would reinforce the negative outlook, paving the way for sellers to test the May 2017 lows, at 0.8385.

In brief, the picture looks negative, with a break back above the 0.8730 zone needed to bring that into question.

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