Stays near multi-month lows, seems vulnerable to further decline

• EUR / GBP stops its recovery attempt near the upper end of a downtrend channel.
• The subsequent drop to fresh multi-month lows has set the stage for a further short-term decline.
• A sustained move above the trend channel resistance is needed to nullify the bearish outlook.

The EUR / GBP cross has extended Friday’s rejection dip from the upper bound of a short-term bearish channel and has dropped to multi-month lows on the first day of a new week. The cross has reached an intraday low of 0.8723, although it has lacked a strong continuation sell.

Meanwhile, technical indicators on the 4-hour and daily charts remain deep in bearish territory and support prospects for a further decline. Therefore, a subsequent drop to the 0.8700 level, en route to trend channel support around the 0.8675 region, now seems like a clear possibility.

A convincing breakout will be seen as a new trigger for the bears and will lay the groundwork for an extension of the recent well-established downtrend seen in the last two months or so.

On the other hand, immediate resistance is near the horizontal zone of 0.8765-75. The mentioned region coincides with the trend channel resistance, which should now act as a key point for short-term traders. Therefore, a sustained move above this region could trigger a rebound in short coverage.

The EUR / GBP cross could then break above the 0.8800 level with the aim of testing its next big hurdle near the 0.8860-65 region, with some intermediate resistance near the 0.8825 zone. Momentum could extend further and help the cross to regain the round 0.8900 level.

EUR / GBP 4-hour chart

EUR / GBP technical levels