Waiting for a breakout of the descending triangle, attention is on the ECB

• EUR / GBP is witnessing some selling on Thursday, although it remains within the recent range.
• The formation of a descending triangle supports the prospects for a further short-term bearish move.
• A rally above 0.9065 will negate the bearish setup and trigger a short covering move.

The EUR / GBP cross moved lower during the European session on Thursday, staying close to the lower end of its daily range, around the 0.9020 region.

From a technical perspective, the cross has been drawing some buying near horizontal support just ahead of the 0.9000 key psychological level. However, attempts at positive moves have repeatedly failed near a one-week downtrend line. The combination of horizontal support and downtrend line constitutes the formation of a descending triangle on short-term charts. The setup favors the bears and supports the prospects for an extension of the recent pullback from near the 0.9300 level.

The negative outlook is reinforced by the fact that the technical indicators on the 4-hour and daily charts have been struggling to gain significant traction. That being said, it will still be prudent to wait for a sustained breakout of the triangle support before taking further bearish positions. Below the 0.9000 level, the EUR / GBP cross is likely to accelerate the decline to the intermediate support of 0.8940-35 before finally falling to test the 0.8900 region.

On the other hand, the downtrend line, currently around the 0.9065 region, could continue to act as strong resistance. Some buying above this level will nullify the bearish setup and trigger an aggressive short covering move towards the round 0.9100 level. Momentum could push the EUR / GBP cross towards the 0.9130 resistance zone on its way to the 0.9150-60 resistance zone. The bulls could then aim to regain the round 0.9200 level.

EUR / GBP 1 hour chart