EUR/GBP Outlook: Bearish Engulfing Weighs and Keeps the Downside Vulnerable

The cross is consolidating above important supports at 0.8486/77 (converged 10/20DMA’s / Fibo 38.2% of 0.8249/0.8618) following Wednesday’s sharp drop (0.9%).

Bearish engulfing pattern formed on Wednesday, along with large bearish daily candle, weigh on near-term action, with rising bearish momentum on daily chart, adding to negative signals and keeping the downside vulnerable.

Clear break of 0.8486/77 pivots would spark fresh acceleration lower and risk test of next key level at 0.8443 (200DMA), loss of which would further weaken near0term structure and allow for deeper drop.

Key support lays at 0.8392 (May 17 higher low)and break here would complete failure swing pattern on daily chart and signal reversal.

Conversely, return above 0.85 handle would ease immediate downside risk, but lift above 0.8589 (Tuesday’s peak) is needed to bring bulls fully in play for renewed attempt towards 2022 high at 0.8618 (May 12).

Res: 0.8500; 0.8531; 0.8567; 0.8586.

Sup: 0.8486; 0.8477; 0.8443; 0.8432.