EURGBP is forming an upside rally, following the bounce off the 0.8530 support area. However, the market has been developing within a descending channel since April 26 and a strong boost may penetrate this pattern to the upside in the next few sessions. The RSI is flirting with the 50 level to gain some momentum, though, the stochastic is suggesting a potential downside pullback as it turns down from the overbought region.
If price action climbs above the 0.8600 number, there is scope to test the 0.8670 resistance. Clearing this key level would see additional gains towards 0.8730 and the 0.8790 barrier. The latter is considered to be a strong resistance as it overlaps with the 200-day simple moving average (SMA). Moving higher, the market could open the door for a more bullish trend action until 0.8946.
If the 20- and 40-day SMAs fail to hold the price up, them the focus would shift to the downside towards 0.8530, which if breached, would intensify bearish pressure, and test the 13-month bottom of 0.8470. From here, EURGBP would be on a path towards the 0.8280 support, taken from the low on February 16.
Overall, EURGBP has been bearish since peaking at 0.8730; however, a break above the downward sloping channel may switch the current short-term bearish view to neutral.
