- EUR / GBP is witnessing some selling for the fourth day in a row.
- The formation of a descending channel points to a well-established downtrend.
- Any recovery attempt could be seen as a selling opportunity and remain limited.
The EUR / GBP cross remains under pressure for the fourth day in a row on Wednesday and weakens further below the 0.8700 level during the early part of the European session.
From a technical perspective, the recent drop to the lowest level since the end of April 2020 has occurred within a downward sloping channel. This points to a well-established downtrend and supports prospects for further short-term weakness.
That said, the RSI on the daily chart already shows mild oversold conditions and warrants some caution for bears. This makes it prudent to wait for some consolidation or a modest bounce before positioning for a further decline.
However, the bearish acceptance below the round level of 0.8700 may have already set the stage for an extension of the downside move. Therefore, a subsequent slide towards the channel support, around 0.8650, seems like a clear possibility.
On the other hand, any significant recovery attempt is likely to face stiff resistance near the 0.8715-20 region. This is followed by a confluence barrier near 0.8750, which should act as a key point for short-term traders.
This last level coincides with the upper limit of the mentioned channel and the 200 hourly SMA. A sustained move above this region will negate the negative bias and could trigger an aggressive short-hedging move, which should push the EUR / GBP cross close to the 0.8800 level.
EUR / GBP 1 hour chart
EUR / GBP technical levels
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