Last Thursday, EUR/GBP tumbled after it hit the downside resistance line drawn from the high of August 12th, but the slide was stopped near the medium-term upside support line taken from the low of May 6th. Then, the rate started to slowly move higher, but it still remains below the pre-discussed short-term downside line. Thus, although the medium-term upside line keeps the prevailing uptrend intact, we would like to see the rate emerging above the short-term downside one before we get confident on further advances.
Such a move would also bring EUR/GBP above the 200-EMA on the 4-hour chart, as well as above the 0.9100 barrier, which acted as a decent support on August 16th and 20th. The bulls could then get encouraged to drive the battle higher, towards the 0.9160 area, which is defined as a resistance by the highs of August 21st and 22nd. Another break, above 0.9160, could extend the recovery towards the 0.9190 zone, slightly above the peak of August 20th, and near the high of August 16th.
Looking at our short-term oscillators, we see that the RSI started moving higher after it hit support near its 30 line. It now stands slightly below 50, but it points up. The MACD, although negative, lies above its trigger line, pointing north as well. These indicators suggest that the pair may start gathering positive momentum soon, which supports the notion for some further near-term advances.
On the downside, we would like to see a clear and decisive dip below 0.9035 before we start examining whether the bears have gained the upper hand again. This would also drive the rate below the upside support line drawn from the low of May 6th, and could initially aim for the psychological round figure of 0.9000, which acted as a resistance between July 19th and 23rd. If that area fails to stop the rate from drifting further south, then the bears may put the 0.8960 hurdle on their radars, marked by the inside swing high of July 25th.
