Surprising some in the market, EURGBP plunged through a technical short term floor in morning trade.  Previously trading at 0.8725, the currency pair is now trading 0.8625 – or about 100 pips less in just the last 60 minutes.  With the 0.8670 short term support level now taken out, currency traders will be looking to support at the psychological 0.8600 level in the short term.

Boosting the validity of this level are additional technical readings.

Primarily, the stochastic oscillator is indicative of a short term reversal in the pair – falling to a reading of 5.58 in the 60-minute time frame.  The relative strength index is also showing an oversold signal, printing 13.91 right now – far below the benchmark minimum of 30.  Both signals are being combined with a potential hammer candlestick formation.  We look for this to be completed in the next 40 minutes.  If so, the reversal formation would confirm a highly probable turn as the currency touches the 0.8600 barrier.

EURGBP 60-minute timeframe – Source:  FXTrek Intellicharts

Any potential upside as a result of the 0.8600 would be met with resistance at 0.8645.  This level served as the 61.8% Fibonacci retracement level of the previous 0.8535-0.8831 bull wave and will now serve as the initial level of resistance on a turn higher.  A penetration above this level would see momentum stop at the 0.8680 barrier in the short term.

Incidentally, further downside breaks below the 0.8600 won’t spark any support level buying till around 0.8543 October 3rd session low.