- The EUR / GBP sees some selling on Wednesday and returns the gains of the previous day.
- The formation of a descending triangle supports the prospects for further weakness in the short term.
- A sustained break below the horizontal support at 0.8560 will reaffirm the bearish outlook.
The EUR / GBP cross encountered renewed selling pressure on Wednesday and extended the previous day’s rejection drop from resistance at a downtrend line. The downward movement has dragged the 0.8585-80 region to the cross, at new daily lows at the start of the European session.
The next relevant support is near the horizontal zone of 0.8560 tested earlier this month. This, together with the aforementioned trend line, constitutes the formation of a descending triangle on the daily chart. A convincing breakout will set the stage for a further short-term decline.
Meanwhile, technical indicators on the daily chart remain in negative territory and support prospects for a bearish breakout. That being said, it will still be prudent to wait for some continuation selling below the triangle support before opening aggressive bearish positions.
The EUR / GBP cross could accelerate the slide towards the key psychological level of 0.8500. The downward movement could extend further towards the 14-month lows, around 0.8470 touched in April.
On the other hand, the 0.8600-0.8610 region now appears to act as immediate resistance. This is followed by the resistance of the downtrend line, around the 0.8630 region, which if decisively exceeded will negate the bearish outlook and trigger some short coverage movement.
The subsequent positive move has the potential to lift EUR / GBP past intermediate resistance near the 0.8670 zone and allow the bulls to once again aim to regain the 0.8700 level.
EUR / GBP daily chart
Technical levels to observe
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