EURGBP Could Break 1-Month Rising Support, Upside Momentum Fading
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EURGBP TECHNICAL ANALYSIS
- Will the two-month EUR/GBP uptrend reverse?
- Negative RSI divergence shows upside momentum is fading
- Brexit volatility likely to be reflected in GBP
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Since May, EURGBP has been climbing along an upward-sloping two-month support channel that almost broke approximately a week ago. The pair may continue trading higher, though the path of least resistance suggests the pair will capitulate as negative RSI divergence shows that upside momentum is fading.
EURGBP – Daily Chart
However, a change in the indicator by no means guarantees that there is a trend reversal approaching, but rather illustrates that the upside momentum that carried the pair to their current levels may be waning. A break from the uptrend would fall in line with fundamental headwinds, which – at least for next week – may be primarily blowing harder against the Euro relative to Sterling –barring any unexpected news.
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Zooming out to a weekly chart shows that the pair has spectacularly recovered after it approached the upper bound of the 3-year support area between 0.8300-0.8477 (red dotted lines). Since May 6, EURGBP has climbed over five percent and has closed higher for seven consecutive weeks. Looking at the ROC shows that that in the past two weeks, EURGBP had its most impressive run since August 2017.
EURGBP – Weekly Chart
Looking ahead, monitoring this uptrend with scrutiny will be crucial to determine if the pair’s resolve for climbing higher holds or whether it will crash from its sugar rush. It is worth noting that Sterling’s price moves are frequently impacted by Brexit-related developments. As such, the volatility of the situation is often reflected in proportional price moves in GBP.
EURGBP TRADING RESOURCES
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- Having trouble with your strategy? Here’s the #1 mistake that traders make
--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitri on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.