Technical Analysis – EURGBP sell off takes a breather
- EURGBP is in the green today, a tad below 0.8340
- Euro bulls are trying to recover some of their recent losses
- Momentum indicators have turned bearish
The bulls’ failed attempt to push EURGBP above the 100-day simple moving average (SMA) in early November resulted in a protracted sell off, which got an extra boost after Trump’s win. The continued ECB dovishness coupled with the negative newsflow from Germany have also contributed to EURGBP trading at the lowest level since March 2022. EURGBP is edging slightly higher today, with the medium-term trend from the mid-November 2023 peak acting as resistance.
Meanwhile, momentum indicators have turned bearish. The Average Directional Movement Index (ADX) is edging tentatively higher, above its 25-threshold, and thus pointing to a muted bearish trend in EURGBP. Similarly, the RSI has dropped below its midpoint, revealing some degree of bearish pressure. Importantly, the stochastic oscillator has returned to its oversold area. It can hover in this region for a while before showing any signs of a bullish breakout.
Should the bears remain optimistic, they could try to keep EURGBP below the November 20, 2023 descending trendline and then stage another downleg towards the 0.8202-0.8221 area. The January 8, 2012 and March 7, 2022 lows currently reside there, along with the August 8, descending trendline. If successful, the door would then be open to a multi-year low.
On the flip side, the bulls are keen for a move above both the November 20, 2023 trendline and the 0.8304 level. Higher, they could test their determination against August 4, 2022 low at 0.8339 level, which stands a tad below the 50-day SMA at 0.8363. More importantly, a move above the 0.8375-0.8406 region could reverse the current bearish trend.
To sum up, EURGBP bears are in control and potentially preparing for the next downleg, provided the newsflow supports their intentions.
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