EUR/GBP traded lower on Wednesday after hitting resistance at 0.8435. However, the pair continues to trade above the upside support line drawn from the low of Apr. 14, which keeps the chances of a rebound alive. There is also another shorter-term line, a downside one, drawn from the high of Apr. 26, and thus, as long as the pair trades between those two diagonal lines, we will hold a flat stance.
We will get more confident about the upside upon a break above 0.8435. This may confirm the break above the short-term downside line taken from the high of Apr. 26 and allow advances towards that peak, at around 0.8465. If the bulls are unwilling to stop there, then a higher break could carry larger bullish implications, perhaps paving the way towards the high of Mar. 31, at 0.8512.
Looking at our short-term oscillators, we see that the RSI, although above 50, turned down and got back near that equilibrium line, while the MACD lies near both the zero and trigger lines, pointing sideways. In our view, this points to a lack of directional momentum and adds more credence to our choice of standing pat for now.
On the downside, we would like to see an apparent dip below 0.8370 before examining the bearish case. The rate will already be below the upside line drawn from the low of Apr. 14, and it will also confirm a forthcoming lower low on both the 4-hour and daily charts.
The bears may then get encouraged to dive towards the low of Apr. 22, at 0.8310, the break could extend the fall towards the 0.8280 zone, near the lows of Apr. 19 and 20.
