EUR/GBP has extended its decline, with a clear pattern of lower highs and lows reinforcing the corrective trend. While a short-term bounce is possible, a break below the 200-DMA at 0.8630 could open the door to deeper losses, Société Générale's FX analysts note.

Descending channel pressures EUR/GBP

"EUR/GBP has extended its decline after encountering strong resistance near 0.8865 in November. The pair has been forming a sequence of lower highs and lows on the daily timeframe chart, signaling a corrective phase. It is now near the lower boundary of a descending channel and the 200-DMA around 0.8630."

"A short-term rebound cannot be ruled out; however, last week’s high at 0.8745 is likely to act as resistance. Failure to hold the MA at 0.8630 could trigger a deeper down move toward the August low at 0.8590 and 0.8555/0.8540."