EURGBP has fallen out of a 5-month rising channel and found support at the 50-day moving average and at the 23.6% Fibonacci level around 0.7850. This retracement level is of the upleg from 0.6981 to 0.8116. (November to April rise).
After reaching the high of 0.8116, (the highest since June 2014), there was a subsequent correction in the market since RSI reached overbought levels at 70. The RSI indicator has dipped below 50 into bearish territory suggesting the risk of more downside momentum. A close below the 23.6% Fibonacci would open the way for a fall to the 38.2% Fibonacci level at 0.7682.
If the current support level holds and if RSI turns back up, we could see a bounce in prices back towards the key 0.80 level. A break above this would give scope for a retest of the 0.8116 high. If the pair extends beyond this peak, then there would be a resumption of the recent uptrend.
The overall outlook remains bullish since the pair has not retraced more than 50% of the November to April rise. Also the market is above the 200-day moving average and this supports the underlying bullish bias.
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