The EUR/GBP pair rose to an 11-day high of 0.8923 on Monday as Pound was offered across the board on rising political uncertainty. As of writing, the currency pair trades in a sideways manner around 0.89 levels.
- On the above chart, the head and shoulders failure yielded a descending triangle pattern. A daily close above 0.89 levels would mark a bullish triangle breakout/bullish trend change and shall open up upside towards 0.9022 (Oct. 20 high).
- The 5-day MA and the 10-day MA are curled upwards in favor of a bullish breakout.
- Also, the relative strength index (RSI) has moved back to bullish territory (above 50.00).
- Thus, bears are in trouble. The only factor that favors the bears is the descending 50-day MA, although in the past (in January) the downward sloping 50-day MA alone could not stop the pair from adding close to 200-pips.
- Again, there is little room for bears here... As we can see, the bulls have successfully defended the critical ascending trend line (drawn from late May 2016 low and April 2017 low).
- The RSI has built a nice base around 50.00 levels and a bullish move on the price chart would end up lifting the RSI as well.
- The 5-week MA and the 10-week MA are neutral and could begin curling up if the spot closes the current week above 0.89 levels. Meanwhile, the 50-week MA is beginning to curl up slightly. The 100-week MA and the 200-week MA are positioned one below the other in favor of the bulls.
- The cross looks set to test 0.8945 (100-day MA) and possibly extend gains to 0.9022 (Oct. 20 high) and 0.9033 (Oct. 12 high).
- Bears may get a chance to flex their muscles if the support offered by the trend line sloping upwards from the Nov. 1 low and Nov. 10 low is breached today.
- A better-than-expected UK CPI could yield a downside move, but it may end up being a 'bear trap' as the upward sloping 5-day MA and 10-day MA are likely to push the cross back to 0.89 levels.
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