EUR/GBP fell sharply yesterday, hit support at 0.8525, and then it rebounded somewhat. However, the recovery remained short-lived near the 0.8550 zone, and then the rate fell again. Now it is trading back near the 0.8525 level. Bearing in mind that yesterday’s fall resulted in the break of the upside support line drawn from the low of Aug. 24, we would consider the short-term outlook to have turned negative.
If the bears are strong enough to push the action below the 0.8525 barrier, we could soon see a test near the low of Aug. 19, at 0.8505, the break of which could carry extensions towards the low of Aug. 16, at 0.8483. If the bears are not willing to stop there either, then we could see them diving towards the 0.8450 zone, defined as a support by the lows of Aug. 10 and 11.
Shifting attention to our short-term oscillators, we see that the RSI turned down again and is now near its 30 line, while the MACD lies below both its zero and trigger lines, pointing down. Both indicators detect accelerating downside speed and support the notion for further declines in this exchange rate.
On the upside, we would like to see a strong rebound back above 0.8613 before we start examining the bullish case. This would confirm a forthcoming higher high and may see scope for advances towards the 0.8655 zone, or the 0.8668 barrier, marked by the high of July 21.