The EURGBP pair has started to move back towards the 0.8300 support zone after pulling back from the 0.8400 level. The current move lower is being driven by British pound strength.
Most traders would agree that the EURGBP pair has been in a protracted downtrend since early last year. Now, some hints are starting to emerge that the EURGBP pair may have bottomed.
The daily time frame shows that a bullish falling broadening wedge pattern has formed, after the EURGBP pair bounced by around 200 points from the 0.8200 level, which was a key downside objective.
Traders should note that bullish falling broadening wedge patterns are amongst the most bullish reversal patterns and have a high probability of playing out. The pattern is predicting a recovery towards the 0.8600 area.
The ActivTrader platform shows that bullish sentiment is still at extreme levels, with some 82 percent of traders still expecting more upside in the EURGBP pair.
This current euphoric and irrational levels of bullishness is however warning that the EURGBP pair might now be ready to rally just yet. Early bulls still need to be careful with sentiment this high.
EURGBP Short-term Technical Analysis
The four-hour time frame shows that the EURGBP pair is technically bearish over the short-term with the price trading well below its 200-period MA, around the 0.8350 level. A bullish inverted head and shoulders pattern has also formed.
Lower time frame analysis currently shows the EURGBP pair could rally towards the 0.8600 level, according to the size of the inverted head and shoulders pattern. These patterns are typically very bullish, so some hope does still exist for the EURGBP pair.
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EURGBP Medium-term Technical Analysis
The daily time frame shows that the EURGBP pair is trading inside a large descending broadening wedge pattern, with the bottom of the pattern located around the 0.8200 level.
I suspect the next few weeks will be crucial for the EURGBP pair in deciding whether we see the bottom in the euro against the pound, and the start of an epic price rally.
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