Strong 200DMA barrier should ideally cap bounce
The cross bounces from new five-month low at 0.8694, posted after pound’s strong advance last Thu/Fri, on rising Brexit optimism.
Last week’s strong fall (2.1%) failed to close below cracked weekly cloud base (0.8724) that signals bears may take a longer breather.
Recovery approaches weekly cloud top (0.8792), break of which would spark further correction.
Daily momentum and RSI turned north while stochastic enters oversold territory, supporting further recovery and test of strong barriers at 0.8818/27 (Fibo 38.2% of 0.9019/0.8694 / broken 200DMA).
These barriers are key and should cap correction to keep larger bears intact for extension of downtrend from 0.9324 (2019 high, posted on 12 Aug).
Strong optimism for reaching a deal for Brexit keeps sterling underpinned and supports this scenario.
Alternatively, firm break above 200DMA would put bears on hold for extended recovery towards next pivotal barriers tat 0.8864/95 zone (20/10DMA’s / Fibo 61.8% of 0.9019/0.8694 bear-leg).
Res: 0.8818; 0.8827; 0.8864; 0.8880
Sup: 0.8771; 0.8723; 0.8694; 0.8686