Technical analysis – EURGBP – Real selling pressure or false breakout?
The common European currency is currently having an exciting time. The markets’ attention this week is likely to be focused on the ECB’s Interest Rate Decision and Monetary Policy Statement including a press conference on Thursday. Then it continues excitingly, sometime around 12. March, the House of Commons will again vote on the Withdrawal Bill. To date, still many things are unclear. It is true that the Brexit drama could enter its home straight. However, it is not yet clear exactly when the UK and the EU will be able to agree on a letter of intent that the Withdrawal Bill can be wrapped up, thereby dispersing concerns about the Irish backstop.
The EURGBP currency pair is at the centre of the Brexit drama. For many months it has been moving at a high level in a sideways movement. Last week, the market attempted to break out of this movement and reached a new 21-month low.
The current chart technical picture does not look very positive. The MACD is in negative territory. The short-term smoothing lines 38- and 50-day have formed a negative intersection, and the price is below both lines. Finally, with last week’s selling pressure, a lower low was established.
However, there are also some points that could support short-term recovery. The MACD might find a bottom. For further progress in this pair, it is necessary for the market to recapture the area around the 0.862 level. On the way up, a resistance might wait in the 0.873 range. If the bulls drill through it, there might be another potential upside where further resistance could be expected in the 0.880 and 0.890 areas.
If, on the other hand, the bears take over the market, a significant breakthrough through the 0.853 range down would reinforce the negative outlook and could pave the way for selling pressure. Support can then be in the area of 0.884 and around the May 2017 lows of 0.838.
EURGBP Daily Chart | Source: ActivTrader
Written by Daniel Schuetz, External Analyst.
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