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Technical Update - Volatile GBPUSD and EURGBP are struggling for momentum
Kim Cramer Larsson
Technical Analyst, Saxo Bank
GBPUSD is struggling to build on the momentum a close above 1.2735 should have created.
Being rejected a few cents below 1.28 GBPUSD uptrend seems tired and could be exhausting. The RSI divergence is indicating just that.
Sliding back to test the lower rising trendline seems likely. A break below and GBPUSD could test the key support at around 1.2506
However, the 200 and the 55 Daily Moving Averages are not agreeing with RSI divergence. The two Moving Averages are rising indicating underlying bullish mode.
GBPUSD is in fact in a bit of a limbo
Medium-term. Weekly RSI has failed in closing above the 60 threshold thus still showing negative sentiment. GBPUSD needs to break and close above 1.28 to reverse that.
If GBPUSD is breaking below 1.25 down trend is likely to resume with medium-term potential to 1.21-1.20. A break below the 55 and 100 weekly Moving Average would accelerate a sell-off
A close above 1.28 could give GBPUSD momentum to July peak around 1.3146 possibly higher.
EURGBP has retraced 50% of the November sell-off at around 0.8660 to be rejected at the 55 and 200 Moving Averages.
RSI is still in negative sentiment and needs to close above 60 threshold to switch to positive.
A break above 0.8670 the 0.618 retracement at 0.8686 is likely to be tested and taken out for a move to the 0.786 retracement at 0.8724. If that scenario plays out EURGBP would be back above the Cloud (shaded area) thus in an uptrend with further upside potential.
If EURGBP cannot establish another push higher to and above the 0.618 retracement at 0.8686 and RSI cannot close above 60 threshold EURGBP is likely to be sliding back lower.
If RSI is closing back below 40 expect EURGBP to take out low at around 0.8550 Medium-term EURGBP seems to be trading in a slightly rising channel formation. A close below 0.8550 will demolish that picture and could send EURGBP down towards 0.84-0.8340, with minor support at around 0.8490
A weekly RSI close below its lower rising trend would be a good indication of the bearish scenario to play out
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