Jump to new multi-week highs and look for a move above the 0.8700 level

• EUR / GBP gains strong continuation traction for the fourth day in a row on Friday.
• Strong momentum validates this week’s bullish break above the 0.8600 level.
• The slightly overbought RSI on the 1-hour chart warrants caution for intraday bulls.

The EUR / GBP cross has built on this week’s solid rebound from lows in over a year and continued to move higher for the fourth day in a row on Friday. Momentum has led to the cross to fresh six-week highs at the start of the European session, with the bulls now looking for a move above the 0.8700 level.

Looking at the technical outlook, the positive momentum has validated this week’s bullish break above the 0.8600 confluence barrier. The mentioned level comprised the 200-period SMA on the 4-hour chart and a descending trend line, which formed the formation of a bullish descending wedge.

The subsequent move and acceptance above the 23.6% Fib retracement of the dip from 0.9218 to 0.8472 have set up a new short-term bullish move. The constructive setup is bolstered by the fact that technical indicators have been moving up into bullish territory on the daily chart.

That said, the RSI on the 1 hour chart already shows overbought conditions and warrants some caution for intraday bulls. Therefore, any move to the upside is likely to stop near the 0.8730-40 resistance zone, near the 38.2% Fibonacci, and could end the rally, at least for now.

On the other hand, the 0.8665 horizontal resistance break point now appears to act as immediate support and is closely followed by the 23.6% Fibonacci, around the 0.8645-40 region. Any further decline could be seen as a buying opportunity and remain limited near the 0.8600 resistance now turned into support.

EUR / GBP 4-hour chart

EUR / GBP technical levels