- EURGBP at a make-or-break point near 0.8500 after plunge
- Oversold conditions detected, but the bears not ready to give up the battle
EURGBP was knocked down near the 200-day simple moving average (SMA) at the start of the month, subsequently losing around 1.0% to reach the critical pivot zone of 0.8490-0.8500 which rescued the pair fourth times since July 2023.
Better-than-expected eurozone PMI figures generated fresh positive momentum today after a decline to 0.8498. With the price having stretched below the lower Bollinger band and the stochastic oscillator preparing its next bullish cycle in the oversold zone below 20, there is potential for some recovery. Yet, Wednesday’s crash below the short-term support trendline at 0.8535 suggests that potential increases might be short-lived and insufficient to reverse the negative trajectory in the market. Recall that April’s peak at 0.8643 formed a new bearish channel in the medium-term picture.
If the bulls cannot take charge above 0.8500, the pair could slump towards the channel’s bottom and into the 0.8415-0.8430 territory last active in 2022. An extension lower could see a test near the August 2022 low of 0.8340.
In the event the current positive momentum in the price accelerates above 0.8535, the 20- and SMAs could challenge the bulls around the 23.6% Fibonacci retracement of the November 2023-February 2024 downleg at 0.8560. If the rally continues, the spotlight will again turn to the flattening 200-day SMA at 0.8600, while any spikes above that wall could cease near the channel’s upper band at 0.8625, which is also the extension of the 2023 resistance line. A break higher could trigger a fast rally towards the 0.8685 region, unless the 61.8% Fibonacci mark of 0.8660 blocks the way up beforehand.
Summing up, EURGBP is currently looking oversold near a critical support zone, which helped the pair gain significant ground in the past. That said, worsened trend signals are reducing the odds for a meaningful rebound.
