After rallying sharply on Thursday, EUR/GBP has now pulled back to a key support level at 0.8380. This move came as a response to comments made by the Governor of the Bank of England, Andrew Bailey. The pair has shifted its trend from a downward bias to a possible short-term uptrend. Confirmation of this reversal would be seen with a break above the October 3 high of 0.8434.
Looking at the daily chart for EUR/GBP, if the bullish scenario plays out, the pair could potentially reach resistance levels around the cluster of Moving Averages in the 0.8450s. The next target above that would be the green 200-day Simple Moving Average at 0.8510. The blue Moving Average Convergence Divergence (MACD) momentum indicator has crossed above its red signal line, indicating a potential change in trend.
However, a move below 0.8311 and the October 1 lows would suggest a reassertion of the medium-term bear trend. In this case, the pair could fall to the next downside targets at 0.8284 (Fibonacci 78.6% extrapolation of the August decline) followed by 0.8236 (100% extrapolation of the same decline). This would confirm that the bearish momentum is still in play.
In conclusion, EUR/GBP has experienced a significant rally followed by a pullback to a key support level. The pair has shifted its trend from bearish to potentially bullish, pending a break above the October 3 high. If the bullish scenario plays out, the pair could target resistance levels around the Moving Averages and potentially reach the 0.8510 level. However, a move below key support levels would confirm a continuation of the bear trend. Traders should monitor these levels closely for potential trading opportunities in the coming sessions.
