A break beyond October 3 would cement the optimistic view

• EUR/GBP retreated to key support after rallying sharply on Thursday.
• The pair has probably reversed its trend, but a break above the October 3 high would confirm a bullish reversal.

EUR/GBP is retreating to the bottom of its multi-month range at 0.8380 after rising on Thursday, October 3 following comments made by Bank of England (BoE) Governor Andrew Bailey.

The pair has likely reversed its previous downtrend and is now starting a new short-term uptrend, however, a break above the October 3 high of 0.8434 would provide confirmation of such a reversal and likely further extension thereafter.

EUR/GBP daily chart

Assuming an optimistic scenario, EUR/GBP is likely to reach the key resistance level at the moving average group in the 0.8450s as well as the top of the consolidation channel. The next target above it is the 200-day green simple moving average (SMA) at 0.8510.

The blue Moving Average Convergence Divergence (MACD) indicator has crossed above the red signal line, further signaling a likely trend change.

A break below 0.8311 and the October 1 lows would be needed to reconfirm bearish bets and suggest that the medium-term bearish trend is reasserting itself. Such a move would be expected to fall to the next downside target at 0.8284 (78.6% Fibonacci extrapolation of the August decline), followed by 0.8236 (100% extrapolation of the same decline).