EURGBP Uptrend Losing Momentum, Increasing Risk of a Euro Reversal

EURGBP Uptrend Losing Momentum, Increasing Risk of a Euro Reversal


EURGBP Technical Analysis

  • EURGBP uptrend momentum is fading on RSI, reversal ahead?
  • Net-short EURGBP positioning still offers a bullish trading bias
  • EURGBP 4-hour chart warns of a test to come at rising support

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Since I pointed out a bullish reversal warning in early May, the Euro has advanced over four percent against the British Pound. Taking a look at technical analysis, can that be sustained? As of late, the EURGBP uptrend has slowed after the psychological barrier between 0.8811 and 0.8838 was taken out. But, it appears that it left a mark on the currency pair.

As EURGBP approaches the next major resistance level, which is a range between 0.8923 and 0.8953 on the chart below, keep an eye on support. That would be a rising channel going back to the middle of May highlighted in red below. Meanwhile, negative RSI divergence warns that upside momentum is fading. This can lead to a turn lower ahead.

EURGBP Daily Chart

EURGBP Uptrend Losing Momentum, Increasing Risk of a Euro Reversal

Chart Created in TradingView

Zooming in on the 4-hour chart to take a closer look at near-term behavior, an area of resistance appears to have established itself at 0.8888. Negative RSI divergence is also present here. If this area were to be taken out, that would open the door to testing key resistance noted earlier. Otherwise, a descent through 0.8811 exposes 0.8698.

Meanwhile, IG Client Sentiment is showing that EURGBP is one of the most heavily-invested net-short trade when comparing overall conviction to other currencies, commodities and equities. This is still offering a EURGBP bullish-contrarian trading bias and may result in further gains down the road.

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EURGBP 4-Hour Chart

EURGBP 4-Hour Chart

Chart Created in TradingView

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— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter





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