EURGBP still consolidating; unable to break above upper channel


EURGBP has been consolidating since September 2017 and has been stuck in a channel tilted slightly to the downside. The neutral to bearish picture in the medium term looks to last for a while longer after prices failed to break above the upper channel earlier this month.

Resistance was met at around the 0.8950 region after prices hit a 3-month high of 0.8967, forcing the pair to reverse lower. The negative bias in the near term is supported by the deterioration in the momentum indicators. The %K line of the stochastic oscillator has fallen sharply into oversold levels and is attempting a bullish crossover with the %D line. However, the RSI is flatlining at the 50-neutral level, suggesting any upside correction will be weak.

If prices continue to head lower, support should come from the 50-day moving average (MA) near the 0.8840 mark. A drop below the 50-day MA would reinforce the short-term bearish view and open the way towards the 0.88 level, which has been a major support area in the past.

However, should an upside reversal take form, immediate resistance will likely come from the 200-day MA around 0.8890. A break above the 0.8890 level could shift the bias back to a bullish one, with the next resistance coming from the 0.8920 level before re-challenging the March high of 0.8967.

VIARaffi Boyadjian, XM Investment Research Desk
Raffi graduated from the London School of Economics in 1999 with a BSc in Business Mathematics and Statistics. Following graduation, he joined PricewaterhouseCoopers in the Business Recoveries team, where he was responsible for handling the process lifecycle of companies in liquidation. In 2007, Mr Boyadjian joined Thomson Reuters, covering the Greek-speaking markets for the collection and analysis of company data and corporate news, and he was later promoted to Senior Analyst.