EUR/GBP stretched its four-week rally to an almost five-month high of 0.8900 on Tuesday before pulling slightly lower.
The MACD seems to be losing momentum below its red signal line, the RSI is still hovering around its 70 overbought mark and the red Tenkan-sen is flattening well above the blue Kijun-sen, all signaling a more cautious trading in the short term.
The market trend, however, is likely to hold on the upside as long as the price holds far above its moving averages and the Ichimoku cloud.
Should weakness extend below the 0.8800 mark, support to downside movements could be initially detected within the 0.8740-0.8720 area. Clearing that zone, the next stop could be around 0.8776, a frequently tested level since the start of the year.
Alternatively, the pair needs to overcome the 0.8900 top to meet a key barrier between 0.8935-0.8970. The 0.9000 mark could act as resistance too before a more important battle starts near 0.9060
In the three-month picture, the sentiment turned bullish after the price surpassed the 0.8676 number. The positive slope in the 50-day SMA, which moves closer to the 200-day SMA, also adds optimism for a brighter outlook.
All in all, EUR/GBP maintains bullish both in the short and the medium-term timeframes.
by Christina Parthenidou, XM Investment Research Desk
Christina joined the XM investment research department in May 2017.
She holds a master degree in Economics and Business from the Erasmus University Rotterdam with a specialization in International economics. Previously, she earned a bachelor of science in Economics from the University of Cyprus. Apart from foreign exchange markets, her research interests include the impact of International trade on labour markets and product development.