- EUR/GBP witnessed some follow-through selling for the fourth consecutive session.
- The formation of a descending channel points to a well-established bearish trend.
- Any attempted recovery might be seen as a selling opportunity and remain capped.
The EUR/GBP cross remained depressed for the fourth consecutive session on Wednesday and weakened further below the 0.8700 mark during the early part of the European session.
From a technical perspective, the recent downfall to the lowest level since late April 2020 has been along a downward sloping channel. This points to a well-established bearish trend and supports prospects for further near-term weakness.
That said, RSI on the daily chart is already flashing slightly oversold conditions and warrants some caution for bearish traders. This makes it prudent to wait for some consolidation or a modest bounce before positioning for any further decline.
Nevertheless, bearish acceptance below the 0.8700 round-figure mark might have already set the stage for an extension of the downward trajectory. Hence, a subsequent slide towards channel support, around mid-0.8600s, looks a distinct possibility.
On the flip side, any meaningful recovery attempt is likely to confront stiff resistance near the 0.8715-20 region. This is followed by a confluence barrier near mid-0.8700s, which should act as a key pivotal point for short-term traders.
The latter coincides with the top boundary of the mentioned channel and 200-hour SMA. A sustained move beyond will negate the negative bias and prompt some aggressive short-covering move, which should push the EUR/GBP cross to the 0.8800 mark.
EUR/GBP 1-hourly chart
Technical levels to watch
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