The euro (EUR) versus the British pound (GBP) has been entrenched in a steady downtrend since late 2022, using the 200-day simple moving average (SMA) as dynamic resistance on several occasions.

Conversion/Base Lines Serving as Resistance

Recent price action shows that the EUR/GBP currency pair printed a pullback from fresh year-to-date lows of £0.8311 and tested the area between the Ichimoku’s Conversion Line (blue) and Base Line (red) at £0.8373 and £0.8387, respectively.

For now, sellers are on the winning side of things, and a test of recent lows is possible. The air space above the Conversion Line/Base Line area throws light on the Ichimoku Cloud (a widely followed zone consisting of the Leading Span A and B at £0.8380 and £0.8468, respectively), with the upper boundary merging closely with the 200-day SMA mentioned above.

Price Direction?

Seeing the reaction from the Conversion Line/Base Line area and the underlying downtrend, the EUR/GBP pair may test (possibly engulf) year-to-date lows. However, traders may also want to pencil in the possibility of a deeper pullback and a test of the Ichimoku Cloud.

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