EURGBP keeps climbing as it trades above an ascending trend line connecting the lows since late July. Price recently busted through resistance around the .8950 minor psychological level and hit a high of .9032 before showing intention to pull back.
Applying the Fibonacci retracement tool on the latest swing low and high shows that the 50% to 61.8% levels are close to the rising trend line and moving averages’ dynamic inflection points. This is also around the broken resistance, which might hold as support moving forward.
The 100 SMA is above the longer-term 200 SMA to signal that the path of least resistance is to the upside. This suggests that the uptrend is more likely to resume than to reverse. The gap is also starting to widen to indicate strengthening bullish pressure.
However, RSI is on the move down after reaching overbought levels to signal a return in selling momentum. Stochastic is also heading lower so EURGBP might follow suit, allowing the correction to happen. Once both oscillators hit oversold regions and turn higher, buyers could return and push price back up to the swing high and beyond.
There was no clear catalyst for the latest pound selloff but many pinned this on persistent Brexit concerns, which were also highlighted in the latest BOE decision. Meanwhile, there have been some data misses for the euro zone but traders still seem hopeful that the ECB could soon clarify their tightening timeline.
Besides, the euro tends to gain ground as the dollar sells off, and the latest announcement from China on their plans to match the tariffs from the US on August 23 weighed on the US currency. With that, other safe-havens like the yen and franc quickly took over but the euro also managed to catch a few wins.
There are no major reports due from the euro zone for the remainder of the week while the UK has its Q2 GDP and manufacturing production reports.