EURGBP has been in a marvelous rally over the past three consecutive trading days, appreciating by 2.0% to top at 0.8600 and slightly above July’s intra swing high of 0.8583.
The ascend picked up steam following the pivot near the 50-day simple moving average (SMA) and the resistance trendline drawn from 0.8677. The question now is whether the impressive rebound will continue at the same strong pace.
According to the momentum indicators, the market has not confirmed overbought conditions yet as the RSI is still some distance below its 70 level, while the Stochastics have just pierced above 80. Yet, with the price having closed significantly above the upper Bollinger band as it did back in mid-June, a downside correction would not be very surprising either.
Nevertheless, if the 0.8583 region, which is currently adding a footing under the pair, stands firm, and the 61.8% Fibonacci retracement of the latest downleg at 0.8600 allows more increases, the recovery could quickly test the 0.8630 bar. A decisive close above it may clear the way towards the 0.8677 barrier, while higher, the pair may again attempt to breach the 200-weekly SMA around 0.8700.
Should the bears retake control, the price could initially seek shelter near the 50% Fibonacci of 0.8530. Even lower, the slide may fight the 50-day SMA and the broken resistance line around the 38.2% Fibonacci of 0.8484. Crossing beneath that floor, selling pressures may take a breather near the 200-day SMA and the 23.6% Fibonacci of 0.8428 before speeding towards the August trough of 0.8338, unless the 0.8385 low comes to the rescue earlier.
In short, although downside risks in EURGBP are getting larger following the latest exponential recovery, the bulls could still recoup some extra ground if the price manages to close above 0.8600.
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