EUR/GBP Price Analysis: Downtrend stalls at key support level
- EUR/GBP has fallen to a tough support level and stalled.
- The pair remains in a short and medium-term downtrend with some bullish signs complicating the picture.
EUR/GBP finds support at the June 14 lows and consolidates. The pair has been in a downtrend after breaking out of a sideways consolidation or wedge pattern which formed between February and May.
EUR/GBP Daily Chart
The June 14 low at 0.8398 will probably provide robust support and it is possible the pair could undergo a reversal using the level as a launchpad higher. However, there are only tentative secondary indications that this is happening. Price itself continues to fall, and price is the most important indicator.
That said, the pair formed a bullish Japanese Hammer candlestick pattern on July 17 and this was followed by a green up day further confirming the bullish pattern. Candlesticks, however, are more reliable as short-term signals.
EUR/GBP is converging bullishly with the Relative Strength Index (RSI) between the June 14 and July 17 lows. This is also a potentially bullish sign. This happens when price makes a new low, as it did in July, but the RSI does not also make a new low. This indicates a lack of bearish momentum, and can be an early warning sign of a reversal in the trend.
Despite these signs, the short and medium-term trends are still bearish which means broad downside pressure will probably persist, and the odds favor on balance more downside. A break below the lows of the Hammer candlestick at 0.8383 would usher in more weakness. The next target lower would probably be the round-number at 0.8350.
It would require a break above 0.8499 (July 1 high) to upend the downtrend and indicate the pair was in a more bullish environment.
Author
Joaquin Monfort
FXStreet
Joaquin Monfort is a financial writer and analyst with over 10 years experience writing about financial markets and alt data. He holds a degree in Anthropology from London University and a Diploma in Technical analysis.
