EUR/GBP Price Analysis: Faces rejection near 0.8700 mark, downside seems limited

• EUR/GBP continued with its struggle to break through the 0.8700 round-figure mark.
• The technical set-up favours bullish traders and supports prospects for additional gains.
• Dips below the 0.8645-40 area could be seen as a buying opportunity and remain limited.

Having struggled to move beyond the 0.8700 mark, the EUR/GBP cross edged lower on Thursday and was last seen trading near daily lows, around the 0.8680-75 region. The cross has now erased the previous day’s modest gains, though the near-term bias still seems tilted in favour of bullish traders.

The EUR/GBP cross last week confirmed a bullish breakout through a falling wedge pattern. This coupled with the emergence of some dip-buying near the 23.6% Fibonacci level of the 0.9218-0.8472 fall supports prospects for an extension of the recovery from one-year lows touched earlier this April.

The constructive outlook is reinforced by the fact that technical indicators on the daily chart have been gaining traction and eased from the overbought zone on the 4-hour charts. Hence, a subsequent move towards the next relevant hurdle, around the 0.8730-40 supply zone, looks a distinct possibility.

Some follow-through buying beyond the 38.2% Fibo. level should allow the EUR/GBP cross to prolong its bullish trajectory and aim back to reclaim the 0.8800 mark for the first time since early February. The momentum could further get extended towards the 50% Fibo. level, around the 0.8830-40 region.

On the flip side, any meaningful pullback might find decent support near the 0.8645-40 zone – the 23.6% Fibo. level and 50-day SMA confluence. Further weakness might still be seen as an opportunity for bullish traders and remain limited near the falling wedge breakpoint, around the 0.8600 mark.

EUR/GBP daily chart

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