GBP/USD Breaks 5-Year Resistance, EUR/GBP Testing Key Support

EUR/GBP, GBP/USD, Euro, US Dollar – TALKING POINTS

• EUR/GBP may convulse on the ECB rate decision
• GBP/USD could extend its rise, test key resistance
• EUR/GBP testing key support zone: will it break?

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GBP/USD Technical Analysis

GBP/USD continues to climb higher despite negative RSI divergence since mid-October showing upside momentum is fading. The pair is now aiming at a 9-month resistance range between 1.3263 and 1.3307. A break above that would effectively mark a complete recovery in GBP/USD’s decline from the peak on March 13 at 1.3381 through the swing-low on September 3 at 1.1959.

GBP/USD – Daily Chart

GBP/USD chart created using TradingView

On a weekly chart, GBP/USD’s recent price action shows that the pair for the first time has shattered the upper layer of a 5-year descending resistance channel. If the break is met with follow-through, it could be the start of a short-term bullish burst. However, it should be noted that a complete reversal of the downtrend will not likely occur soon as it would require for the par to rise over 30 percent just to erase its losses since 2014.

GBP/USD – Weekly Chart

GBP/USD chart created using TradingView

EUR/GBP Price Chart

EUR/GBP continues to decline but positive RSI divergence suggests downside momentum is fading as selling pressure abates. Cautious buyers appear to be taking the opportunity to get in at what could be a turning point. Traders may wait to go long until the pair to clears the 0.8454 and 0.8491 resistance levels and reaches 0.8597 before offsetting their positions.

EUR/GBP – Daily Chart

EUR/GBP chart created using TradingView

A monthly chart shows that EUR/GBP has entered into a familiar but significant two-range which has acted as support for over three years. The last time the pair was this entrenched this deep in the zone was in May of 2017. Looking ahead, if the pair breaks below the lower bound of the range it could catalyze a massive selloff.

EUR/GBP – Monthly Chart

EUR/GBP chart created using TradingView

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--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitri on Twitter