EUR/GBP Technical Analysis: Brexit News Revives Dominant Downtrend
EUR/GBP Technical Analysis
- The latest Brexit news sent EUR/GBP crashing through key support
- Awaiting a close lower to confirm January downtrend renewal next
- Upside risks include fading downside momentum on the daily chart
EUR/GBP is aiming for its lowest close on the weekly chart since May 2017 after support at 0.8620 gave way. There was a brief intraday rally to the upside towards the end of last week after positive RSI divergence on the 4-hour chart hinted of a turn higher. Fundamentally, the backdrop behind gains in the British Pound across the board were due to fading chances of a ‘no-deal’ Brexit. When looking at the medium-term, the next clear-cut area of support doesn’t seem to come in until 0.8337, a place not tested since 2016/2017.
EUR/GBP Weekly Chart
Zooming in on the daily chart below, EUR/GBP experienced its most aggressive decline over the course of 24 hours since January 11 as it fell 0.89%. Drawing a Fibonacci extension that uses the decline in January and reversal to February 14th, we find that prices are sitting right on the 50% midpoint at 0.8593. For those that are bearish, keep an eye on RSI which indicates fading downside momentum. This could precede a retest of the April 2018 lows around 0.8620.
EUR/GBP Daily Chart
If confirmation of the break under critical support is achieved via another close lower on the daily chart, this could be a strong signal that a resumption of the dominant downtrend from January is in store next. Looking at the EUR/GBP 4-hour chart, such a decline would place the next area of interest around the 61.8% extension at 0.8592. On the other hand, pushing above resistance opens the door to testing the descending trend line from February 14 highs.
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.