EURGBP Sellers Waiting at Channel Top

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EURGBP is trending lower as it forms a descending channel with its lower highs and lower lows on the 1-hour time frame. Price is bouncing off support and looks prime for a test of the resistance next.

Applying the Fibonacci retracement tool shows areas where more sellers might be waiting. The 61.8% level lines up with the channel top around the .9150 minor psychological mark and the moving averages’ dynamic inflection points.

If this is enough to keep gains in check, EURGBP could slip back to the swing low at .9020 or the channel support closer to the .9000 handle. A shallow pullback could already find sellers at the 38.2% Fib that lines up with the mid-channel area of interest or the 50% Fib at the .9120 mark.

Stochastic is approaching overbought levels to signal exhaustion among buyers but is already turning lower to suggest that sellers are eager to return. RSI has more room to climb before reflecting overbought conditions, so the correction could keep going.

There are no major reports due from the eurozone this week, but traders have been focused on the rising number of COVID-19 cases in the region that could prompt another wave of restrictions. As for the pound, Brexit talks are the main contention, with more downside for the currency in the cards if negotiations break down again.

Note that officials are scheduled to make a crucial vote that could determine the fate of the UK economy this week, and losing trade advantages could pose more risks on top of the rise in COVID-19 cases in the country. The euro could also be poised to take advantage of risk-off flows in this case, especially since traders are steering clear of the dollar on account of election risks.

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