A descending triangle is forming, support at 0.8560 is the key level

• EUR / GBP moved into negative territory for the fourth consecutive session on Monday.
• Recent price movements constitute the formation of a descending triangle on the daily chart.
• A sustained break below the 0.8560 support is needed to confirm a further bearish breakout.

The crossing EUR/GBP struggled to capitalize on its positive intraday move, instead encountered fresh supply near the 0.8612 area and updated daily lows in the last hour. The cross has now turned lower for the fourth consecutive session and was last seen hovering around the daily lows, around the 0.8580 region.

From current levels, the next relevant support is tied to the horizontal zone of 0.8560, which represents May’s monthly swing lows, which were retested on Friday. The aforementioned region marks the 61.8% Fibonacci level from the recent bounce of 0.8472-0.8719 from multi-month lows and should now act as a key point for short-term traders.

This, coupled with a short-term downtrend line resistance, constitutes the formation of a descending triangle on the daily chart. A convincing break through the triangle support will shift the short-term bias in favor of bearish traders and trigger some aggressive technical selling around the EUR / GBP cross.

The bearish trajectory could accelerate towards the key psychological mark of 0.8500, with some intermediate support near the 0.8535-30 region. The EUR / GBP cross could eventually pull back towards the challenging yearly lows, around the 0.8470 zone touched on April 5.

On the other hand, the daily swing highs, around the 0.8610-15 region, now appear to act as immediate resistance. This is followed by a strong barrier near the 0.8635-40 supply zone, which coincides with the downtrend line. A sustained force beyond will negate the descending triangle and trigger some short covering move.

The EUR / GBP cross could then aim to break above the 23.6% Fibonacci level – resistance near the 0.8660-65 region and regain the 0.8700 level. Some subsequent purchases beyond the recent swing highs, around the 0.8720 region, will be seen as a new trigger for the bulls and will pave the way for additional short-term gains.

Daily chart

Technical levels