In 2015, this pair succeeded to break below a major monthly support located at 0.7750 level, which sent prices sharply lower to as low as 0.6935 in July.
Since then, we saw a bounce in the summer stopped at 0.7500 psychological barrier.
During this week, the Euro traded higher across the board while the Sterling weakness has resumed.
Technically, we have many reasons to think that a potential bullish reversal is likely to happen.
Momentum indicators are clearly oversold and we believe that the Euro should trade stronger than the British pound in the next month as a Bullish divergence in the RSI indicator has emerged.
This divergence is valid by now, as the indicator succeeded to stabilize above its neutrality zone. In the meantime, the 20WMA has crossed above the 50WMA for the first time since November 2013, reinforcing our bullish outlook. Meanwhile, the 100 weekly moving average stands at 0.7620 level.
Looking at the price action in the weekly chart, we can see that the pair is trading near a major resistance line, located at 0.7490 level.
Volume has increased and momentum indicators are calling for a bullish breakout. Consequently, traders should wait for a close above this level today in order to confirm this bullish signal.
If so, then we expect the pair to rally towards 0.7635-0.7800 zone before a bearish reaction to happen.
Finally, our outlook is bullish by now, and only a weekly close below 0.7160 level will change this view.
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