- EUR / GBP deepened overnight losses and remained depressed for the second day in a row.
- Weakness below 0.8560 horizontal support will confirm a descending triangle breakdown.
- Only a sustained move beyond the 0.8640-45 region will negate the short-term bearish outlook.
The EUR / GBP cross extended the previous day’s rejection decline of short-term descending trendline resistance and saw selling for the second session in a row on Friday. The bearish path dragged the cross to one-week lows, around the 0.8570 region during the mid-European session.
The next relevant support is set near the 0.8560 horizontal area tested earlier this month. This, along with the mentioned trendline, constitutes the formation of a descending triangle on the daily chart. A convincing break below will pave the way for further near-term depreciation.
Meanwhile, technical indicators on the daily chart are holding in negative territory and support the outlook for a possible bearish breakout. That said, it will still be prudent to wait for follow-up selling below triangle support before placing aggressive bearish bets.
EUR / GBP could then accelerate the fall towards the 0.8500 key psychological mark challenge en route to the 14-month lows around the 0.8470 region hit in April.
On the other hand, the 0.8600 mark now appears to be acting as immediate strong resistance. Any subsequent positive movement has the potential to further lift the EUR / GBP crossover, although it is likely to run out of steam near the trend channel (triangle) resistance, currently around the 0.8640 region.
That said, a sustained move beyond will cancel out the bearish setup and cause an aggressive short hedging move. This, in turn, should push the EUR / GBP cross past an intermediate resistance near the 0.8670 area and allow the bulls to aim back to recover the round-digit 0.8700 mark.