EUR/GBP Technical Analysis: Upside Breakout Struggling, May Fail
EUR/GBP Technical Analysis
- EUR/GBP struggling to confirm a reversal of the dominant downtrend from August
- Confirmation requires pushing above 0.89394, but upside momentum is fading fast
- Euro may weaken versus the British Pound, exposing 0.87961 followed by 0.87518
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In the aftermath of EUR/GBP’s largest climb in a single day since June 2016, the pair is attempting to overturn its dominant downtrend. Looking at the daily chart below, the Euro climbed against the British Pound above the descending trend line from August. However, further upside progress was notably lacking and EUR/GBP was unable to push above the October high.
In its attempt to do that, a horizontal range of resistance has formed between 0.89235 and 0.89394 (green range below). This is preventing the pair from confirming the break above the falling trend line from August. There are warning signs that this resistance area may hold, sending EUR/GBP lower and causing it to resume the dominant downtrend.
EUR/GBP Daily Chart
Zooming in on the EUR/GBP 4-hour chart gives us a closer look at the pair’s struggle to push above resistance. Below, as the pair failed to push above resistance, negative RSI divergence formed. This shows that upside momentum is fading and it may precede a turn lower. In that instance, I am watching a near-term rising support line from November 15th.
A descent through that, followed by another one through the August trend line opens the door to testing Fibonacci extension support levels below. The first is the 38.2% level at 0.87961 which is then followed by the 50% midpoint at 0.87518. Should EUR/GBP overcome resistance instead, the next barrier at 0.89957 (September 21st high) may keep prices at bay.
EUR/GBP 4-Hour Chart
**Charts created in TradingView
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--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.