- EUR/GBP dropped to fresh multi-month lows and challenged descending trend-channel support.
- Extremely oversold conditions on the daily chart warrants caution for aggressive bearish traders.
- A sustained move beyond mid-0.8600s is needed to support prospects for any meaningful bounce.
The EUR/GBP cross edged lower through the first half of the European session and dropped to the lowest level since March 2020, around the 0.8620 region in the last hour. The mentioned area marks the lower boundary of over one-month-old descending trend-channel, which should act as a key pivotal point for short-term traders.
Meanwhile, technical indicators on the daily chart are already flashing extremely oversold conditions and warrant some caution before placing fresh bearish bets. This, in turn, supports prospects for some near-term short-covering move. That said, it will still be prudent to wait for some follow-through buying beyond mid-0.8600s before positioning for any meaningful recovery.
The EUR/GBP cross might then aim back to reclaim the 0.8700 round-figure mark. Any further positive move is more likely to remain capped near the trend-channel resistance, currently near the 0.8715 region. Only a convincing breakthrough will negate the bearish outlook and pave the way for a further near-term appreciating move towards the 0.8790-0.8800 supply zone.
On the flip side, bearish traders are likely to wait for sustained weakness below the trend-channel support, currently near the 0.8625 region, before placing fresh bets. This would set the stage for a slide towards March 2020 swing lows, around the 0.8595 region en-route the 0.8535 zone and the next major support near the key 0.8500 psychological mark.
EUR/GBP 4-hourly chart
Technical levels to watch
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