- EUR/GBP is back down again from an almost two-week high, although there is no follow-up.
- The formation of an ascending channel points to a short-term uptrend and favors the bulls.
- A sustained break below the 0.8600-0.8590 support would negate the short-term positive bias.
The EUR/GBP cross has seen some selling on Wednesday and has pulled back from nearly two-week highs around 0.8650 hit the previous day. The cross has fallen to a two-day low at the start of the European session, although it has found support near the 0.8600 level and has recovered.
On Tuesday, European Central Bank President Christine Lagarde did not offer any new information on the path of the rate hike or the composition of the new anti-fragmentation tool. This, in turn, was seen as a key factor behind the common currency’s weakness and put downward pressure on the EUR/GBP cross.
Elsewhere, the Brexit woes, coupled with expectations that the Bank of England would opt for a more gradual approach in raising interest rates, acted as a headwind for sterling. The combination of divergent forces prevented the bears from opening aggressive positions around the EUR/GBP cross.
Market participants also seemed reticent ahead of ECB President Christine Lagarde and BoE Governor Andrew Bailey’s speech at the ECB forum in Sintra, Portugal. Therefore, it is prudent to wait for some continuation selling before positioning for a further drop in the EUR/GBP cross.
From a technical point of view, the recent bounce from near the psychological level of 0.8500 has occurred along an uptrend channel and points to a short-term uptrend. The lower end of the channel coincides with the daily low and should now act as a key point.
A convincing break below that region could spark an aggressive technical sell and drag the EUR/GBP cross to intermediate support near the 0.8560 area. The move down could extend further towards last week’s low just above the 0.8500 level.
On the other hand, the 0.8650 area, the previous day’s high, seems to act as an immediate resistance ahead of the 0.8675 region, the upper limit of the mentioned channel. Sustained strength above this zone would be seen as a new trigger for the bulls and pave the way for further gains.
EUR/GBP 4 hour chart
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EUR/GBP additional technical levels
Source: Fx Street
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