- EUR/GBP achieves strong continuation traction on Friday and hits a new yearly high.
- The acceptance above the 200 SMA and the breakout of the descending trend line favors the bulls.
- The cross looks ready to reclaim the 0.8600 level and continue to climb higher.
The EUR/GBP cross has built on the previous day’s strong Bank of England inspired rally and gained strength for the second day in a row on Friday. The momentum carried EUR/GBP to a new yearly high, around the 0.8555-0.8560 region during the early part of the European session.
From a technical perspective, the sustained strength above the very important 200-day SMA was seen as a new trigger for the bulls. The subsequent break of a descending trend line that extends from April 2021, supports the prospects of a new move higher in the short term.
That said, the RSI (14) on the daily chart has moved on the verge of entering overbought territory and warrants some caution. Therefore, it will be prudent to wait for some consolidation or a modest pullback before investors begin to position themselves for short-term bullish breakout momentum.
The EUR/GBP cross looks ready to head higher to reclaim the 0.8600 round level for the first time since Oct 2021. Some continuation buying has the potential to lift prices towards the 0.8625 intermediate hurdle on the way to the 0.8655 area. -0.8660.
On the other hand, the breakout point of the descending trend line resistance, just ahead of the psychological level of 0.8500, now seems to defend the immediate drop. Any further decline is likely to attract further buying and remain capped near the 0.8440 (200 SMA) region.
This last level should act as a strong base for the EUR/GBP cross, which if broken will negate the positive bias. Subsequent technical selling would expose the next relevant support near the 0.8400 level, followed by the weekly low around the 0.8365 area.
EUR/GBP daily chart
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EUR/GBP additional levels
Source: Fx Street
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