The euro currency is at risk of further extended losses against the British pound after the pair recently broke below a long-term rising trendline that has been in play since late 2019.
Since March of this year the pair has been trading tentatively between the 0.8500 to 0.8650 price range, following the early year breakout from the EURGBP pairs long-term range, which is basically been set between the 0.8800 to 0.9350 levels.
Looking more closely at the long-term trendline, it is made up by connecting the June 2016 swing-low to the December 2019 swing-low, at is currently located around the 0.8540 area.
Should we see the EURGBP pair start to settle under this key trendline it could be a major sell signal. In terms of how far the pair could decline, the 0.8450 and 0.8200 levels are highly probable downside targets.
Something else to watch is the high levels of bullish sentiment towards the EURGBP as the trendline break transpires. The ActivTrader market sentiment tool is showing that traders are 88 percent bullish towards the EURGBP pair at this moment in time as the price declines towards new multi-month lows.
This is a worrying one-way trading bias, and due to the fact that retail traders are often wrong, it does suggest further heavy losses are possible. It is also noteworthy that the EURGBP pair trades under its 200-day moving average, meaning the trend is still bearish.
EURGBP Short-term Technical Analysis
The four-hour time frame shows that a bearish head and shoulders pattern is starting to play out to the downside after nearly two months of lackluster trading.
Looking at the overall size of the pattern the EURGBP pair could fall towards the 0.8480 level in the short-term. A move towards the 0.8450 support level is also possible.
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EURGBP Medium-term Technical Analysis
The daily time frame shows that the EURGBP pair is vulnerable to further declines following the recent trendline breakout below the 0.8540 support level.
Other negative technical factors weighing on the EURGBP pair include a bearish head and shoulders pattern, and a broadening expanding wedge pattern. Both have a target of 0.8200.
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