EUR/GBP Facing Long Term Resistance

Last Friday, we saw EUR/GBP testing a long term trend line resistance that dated back to the highs of December 2008 (click here to see). The pair has since moved lower after being rejected from the trend line and looks to have found a near term pivot in the area of its 23.6% Fibonacci level (of the rally from January lows to March highs). This retracement area also comes in roughly around where the highs of December 2010 and January 2011 are and can be seen on the chart below in yellow highlight. While this pivot remains the key technical level to the downside, it can also be seen that the daily RSI indicator has broken a rising support line which suggests potential weakness in the price action of the pair. Moreover, the long term falling resistance line converges with a medium term upwards parallel channel resistance as an added level of resistance. While the pair remains under the trend line resistance levels which it faces, we favor a bearish bias but would note that a break above the trend lines and prior high would signal the potential for continued upside. Key levels to the downside are the 23.6% Fib level at around 0.8650 and then the cluster of daily SMA’s which can be seen just above the 0.8500 level.