EUR/GBP edged north on Monday following remarks by EU chief Brexit negotiator Michel Barnier, who noted over the weekend that he is “strongly opposed” to PM May’s latest proposal on trade. The pair remained under buying interest after the UK manufacturing PMI for August fell to its weakest since July 2016. From a technical standpoint, the pair rebounded from near 0.8940, slightly below the uptrend line drawn from the low of the 21st of June, and managed to move back above the 0.9000 psychological zone. In our view, this keeps the near-term outlook positive.
We believe that the break back above the 0.9000 zone may have opened the way for the 0.9035 resistance obstacle, marked by the low of the 27th of August. If the bulls are strong enough to overcome that barrier, then we may see them setting the stage for our next resistance zone of 0.9100, near the peak of the 28th of August.
Shifting attention to our short-term oscillators, we see that the RSI rebounded from near 30, emerged above 50, and is now pointing up. The MACD, although negative, has bottomed and crossed above its trigger line. It points north as well. These indicators support the notion for EUR/GBP to continue drifting higher for a while more.
On the downside, we would like to see a clear break below the uptrend line drawn from the low of the 21st of June before we abandon the bullish case, at least in the short run. Such a break could initially aim for Friday’s low, at around 0.8940. Another break below 0.8940 would confirm a forthcoming lower low on the 4-hour chart and may signal a trend reversal. If this is the case, then we may see the bears taking the driver’s seat and pushing the rate towards the 0.8900 territory.
