EUR/GBP Returns to the Scene of the BreakdownEuro / British PoundCAPITALCOM:EURGBPCapitalcomEUR/GBP has spent the past six weeks steadily recovering from its July lows, but that recovery is now approaching a much more important test. Price is returning towards an area that repeatedly acted as support during the first half of the year before finally giving way in June. With UK and eurozone growth data due this week and the ECB meeting on Thursday, the market has both a clearly defined technical area and several potential catalysts capable of testing it. Why the old floor matters The area now sitting above EUR/GBP is significant because of how consistently it supported price earlier in the year. Between February and June, several attempts to break lower were absorbed around the same area before that support finally gave way towards the end of June. The sell-off that followed was sharp, and EUR/GBP has yet to make a meaningful test of the old floor from underneath. That makes the current recovery the first real opportunity to see whether former support is now ready to act as resistance. EUR/GBP Daily Candle Chart Past performance is not a reliable indicator of future results That does not mean former support has to become resistance. The longer-term descending trendline still sits above the market, but the recovery from July has been persistent and, as we drop down to the four-hour chart, there is little sign yet that buyers are backing away as the old floor approaches. This describes current chart structure only and is not a forecast of future price direction. Pressure is building underneath The four-hour chart adds an important piece of context. EUR/GBP has continued to form higher lows since July and has now broken through the smaller area of resistance that capped several rallies during August. Just as importantly, price has not immediately given that breakout back. Instead, EUR/GBP has started to consolidate relatively close to its recent highs, suggesting buyers are still willing to press against the much more significant daily level overhead. EUR/GBP Four-Hour Candle Chart Past performance is not a reliable indicator of future results That makes simply reaching former support unlikely to tell us enough. A rejection followed by a break in the sequence of higher lows would provide much stronger evidence that the old floor is beginning to act as a ceiling. Equally, a break through the daily level would only be the first step. If EUR/GBP can then hold above it, the significance would go beyond an ordinary breakout. Price would be reclaiming an area that supported the market for several months before June's breakdown, with the longer-term descending trendline then becoming the next obvious test. The ECB meeting on Thursday could provide the catalyst for that decision. Another rate rise is widely expected, while UK and eurozone growth updates are also due this week. With the rate rise itself already well anticipated, the reaction may depend more on what the new information does to expectations for the relative path of UK and eurozone rates. Rather than trying to second-guess those releases, the charts give us a cleaner framework. EUR/GBP has returned to the scene of its June breakdown with the shorter-term structure still improving. A rejection followed by a loss of that structure could favour the old floor holding as resistance, while a break and acceptance above it could suggest the June breakdown is beginning to unwind. Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 89% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.