EURGBP is still looking overbought according to many technical indicators despite yesterday’s losses. The pair is currently being supported by the middle line of the linear regression channel and has avoided closing below the line during every spike downwards in the past two weeks.
The RSI is flat at the 70 overbought level, and although the stochastics are trending down, it is so far a shallow slope similar to the previous downside reversal which saw the %K and %D lines fall only slightly below the 80 overbought level. A second consecutive day of losses could strengthen the negative intra-day momentum, leading to a sharper correction.
However, the pair would first have to breach the support levels of the 0.91 handle and the middle regression line at around 0.9080, which is not too far from the 161.8% Fibonacci retracement level of 0.9075. Further down, the 100% Fibonacci level of 0.8950 of the downleg from 0.8948 to 0.8742 could act as additional support before the 50-day moving average (MA) comes into scope. A drop below the 50-day MA (currently around 0.89) would turn the near-term bias to negative from the current bullish one.
To the upside, this week’s 10-month high of 0.9142 is a major resistance point that was tested twice on Wednesday. Failure to break above this peak in the coming days could significantly weaken the positive bias, but a successful challenge of it would reinforce the current uptrend. If broken, the next resistance could come from the October 2016 top of 0.9260, followed by the 261.8% Fibonacci level of 0.9280.
In the medium-term, the bullish structure is unlikely to shift anytime soon with price action firmly above the upward trending 50- and 200-day MAs.
