- EUR/GBP prolonged its recent move up and shot to four-week tops on the last day of the week.
- The set-up favours bullish traders and supports prospects for additional gains in the near term.
- Sustained weakness below 50-day SMA will negate the positive outlook and prompt fresh selling.
The EUR/GBP cross built on its recent strong rebound from the lowest level since February 2020, around mid-0.8400 and shot to four-week tops during the European session on Friday.
The momentum stalled just ahead of a confluence hurdle comprising of the 61.8% Fibonacci level of the 0.8670-0.8450 downfall and 100-day SMA. The mentioned barrier, around the 0.8585-90 region, should now act as a key pivotal point for short-term traders and help determine the next leg of a directional move for the EUR/GBP cross.
Meanwhile, technical indicators on the daily chart have just started moving into the positive zone and support prospects for an extension of the over one-week-old recovery move. That said, it will still be prudent to wait for some follow-through buying beyond the said resistance before positioning for any further appreciating move.
The EUR/GBP cross might then accelerate the momentum towards an intermediate hurdle near the 0.8640-45 region before eventually climbing back towards July monthly swing highs, around the 0.8670 area. The next relevant resistance is pegged just above the 0.8700 mark, representing a technically significant 200-day SMA.
On the flip side, the 50% Fibo. level, around the 0.8555 area now seems to protect the immediate downside. This is closely followed by the 50-day SMA, which should now act as a strong base for the EUR/GBP cross. Failure to defend the said support levels might shift the near-term bias back in favour of bearish traders.
EUR/GBP daily chart
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Technical levels to watch
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