Technical Analysis – EURGBP consolidates after 7-year high of 0.9140

EURGBP recently broke the psychologically important 90 pence level during the previous Friday’s pound ‘flash crash’ but retreated back below that level when trading subsequently normalized. The levels reached during the ‘flash crash’ (0.9260) are best kept out of the analysis for now, as they do not reflect normal market conditions; they might be the result of very few trades and the nearly complete absence of bids.

Euro/pound appears to be in an uptrend in the short-term but it has run into resistance today after hitting 0.9140. The Relative Strength Index also showed overbought conditions when that high was made and subsequently there was selling to drive euro/pound back to 0.8966. The RSI is still in bullish territory as it is currently at 54. The psychologically important 0.90 level could also act as a magnet during this consolidation phase.

If the pound continues to strengthen, the euro could drop to 0.8850 – a level which presented some resistance during the previous week. If the euro’s correction continues, this level could become a key support- especially given that the 50-period moving average is also near 0.8850.

Eventually though, particularly if 0.8850 holds, one should expect the pair’s uptrend to reestablish itself and take on 0.9140 another time.

Interested in EUR/GBP technicals? Check out the key levels