- EUR / GBP extends the gains of the previous day and continued to rise for the second day in a row.
- The technical setup favors the bulls and supports the prospects for a move towards the 0.9100 level.
- Sustained weakness below the 0.9000 psychological level will negate the constructive outlook.
The EUR / GBP cross gained traction for the second day in a row on Tuesday and spiked to a three-day high, around the 0.9050 level, during Tuesday’s European session.
The sudden rebound in the last hour is due exclusively to the appearance of some new sales around the British pound. Momentum has pushed the EUR / GBP cross above a confluence comprising the 200 hourly simple moving average and the 38.2% Fibonacci retracement of the recent pullback from the 0.9215-20 double-top resistance.
Meanwhile, the technical indicators on the 1 hour chart have been gaining positive traction and have only just begun to move into bullish territory on the daily chart. The setup favors bullish traders and supports the prospects for an extension of the current recovery movement from the month-long lows around the 0.8930 region reached last Thursday.
Therefore, a subsequent force beyond the 50% Fibonacci retracement, around the 0.9070 region, en route to the round 0.9100 level, now seems like a clear possibility. This last level coincides with the 61.8% Fibonacci, which if decisively exceeded will be seen as a new trigger for the bulls and will set the stage for further gains on the EUR / GBP cross.
On the other hand, any significant retracement below the 200 hourly SMA, currently around the 0.9035 region, could find decent support near the 0.9015 region. This is closely followed by the psychological level of 0.9000. Failure to defend the aforementioned support levels will negate the positive outlook and make the EUR / GBP cross vulnerable to retest the 0.8940-30 area.
EUR / GBP 1 hour chart
EUR / GBP technical levels
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