- EUR / GBP continued its struggle to break through the 0.8700 level.
- The technical setup favors bullish traders and supports the prospects for additional earnings.
- Dips below 0.8645-40 could be seen as a buying opportunity and limit the decline.
Having struggled to move above 0.8700, the cross EUR/GBP It was down on Thursday and was last seen trading near daily lows, around 0.8680-75. The crossover has now erased the modest gains of the previous day, although the short-term bias still seems skewed in favor of bullish traders.
The EUR / GBP cross last week confirmed a bullish breakout via a descending wedge pattern. This, together with the appearance of some buying on the dips near the 23.6% Fibonacci level of the 0.9218-0.8472 drop, supports the prospects for an extension of the recovery from the one-year lows hit in early April.
The constructive outlook is reinforced by the fact that the technical indicators on the daily chart have been gaining traction and have moved away from the overbought zone on the 4-hour charts. Therefore, a further move towards the next relevant hurdle, around the 0.8730-40 bid zone, seems like a clear possibility.
Some tracking purchases beyond 38.2% of the Fibonacci level. The level should allow the EUR / GBP cross to prolong its upward trajectory and aim to regain the 0.8800 level for the first time since the beginning of February. Momentum could extend further towards the 50% Fibonacci level, around the 0.8830-40 region.
On the other hand, any significant retracement could find decent support near the 0.8645-40 zone – the 23.6% Fibonacci level and the 50-day SMA. Further weakness could still be seen as an opportunity for bull traders and remain limited near the breaking point of the descending wedge, around 0.8600.
Daily chart
Technical levels
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