The EURGBP pair is starting to look very bearish on the foreign exchange market after giving back a significant portion of its gains from last week as the single currency weakens against most majors.
Potentially, the fact that the US CPI number came in red hot hurt the euro, following last week’s more hawkish ECB meeting, meaning that US dollar bulls have the upper hand in terms of sentiment again
Technically, and most importantly the EURGBP pair is bearish, as defined by the key 200-day moving average, which trades use to define bull or bears market conditions for financial assets.
Since early last year the EURGBP pair has been trapped in a protracted and bearish downtrend and has a strong sell on any rallies back above the 0.8400 to 0.8500 price range.
This week the EURGBP pair has started to trade back towards its trend defining 200-day MA, currently located around the 0.8500 level, and appears vulnerable to more losses towards the trading lows of the year after failing again at this key technical metric.
Going forward, selling rallies back towards the 0.8500 resistance zone looks a strong bet, especially with sentiment towards the EURGBP pair amongst the retail crowd turning very bullish.
The ActivTrader platform shows that bullish sentiment is at extreme levels, with some 64 percent of traders still expecting more upside in the EURGBP pair. This hints of more long squeezes for retail.
EURGBP Short-term Technical Analysis
The four-hour time frame shows that the EURGBP pair is technically bullish over the short-term with the price trading well above its 200-period moving average on the mentioned time frame.
Lower time frame analysis currently shows the EURGBP pair could drop towards the middle of a large broadening expanding wedge pattern. These patterns are typically bullish, so hope does exist for the EURGBP pair.
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EURGBP Medium-term Technical Analysis
The daily time frame shows that the EURGBP pair is starting to be rejected from just under its 200-day moving average. This is a very bearish development, but not ultimately decisive given lower time frame analysis.
I suspect the next few weeks will be crucial for the EURGBP pair in deciding whether a major recovery is coming, or more lower range trading should be expected this quarter.
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