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The EURGBP pair posted its strongest one-day gain in over six months on Tuesday as the British pound came under severe selling pressure on the foreign exchange market, while the euro benefitted from positive ECB member comments.
The shared currency rallied after ECB President Lagarde talked up the eurozone’s economic prospects during the COVID-19 pandemic, and the central bank’s commitment to growth.
Moreover, the euro caught bait after European Central Bank member Peter Kazimir and Governor of the Bank of Slovakia commented that the central bank might not increase bond-buying via the APP program.
The Gfk Consumer Climate indicator in Germany jumped 0.3% heading into October, which provided an indication, that Germany, the engine of EU growth, was starting to pick-up in terms of growth.
For the pound, Brexit woes continued to cause wide-spread currency weakness. In the latest development, four rival unionist parties in Northern Ireland have formed an alliance to fight the Brexit protocol, plus negative impacts of the higher UK gas prices and rising inflation fears caused currency jitters.
The ActivTrader platform shows that bullish sentiment is starting to rise, and remain at manageable levels, with some 58 percent of traders still expecting more upside in the EURGBP pair.
Severe one-way sentiment skews are rarely correct, so the current bullish bias feels in-line with the bullish price action. I suggest keeping a close eye on sentiment if the EURGBP pair breaks or fails around its 200-day moving average.
EURGBP Short-term Technical Analysis
The four-hour time frame shows that the EURGBP pair is technically bullish over the short-term while the price trades above the 0.8550 level, making it particularly attractive to buy dips.
Former key swing highs around the 0.8610 region provide a layer of support, however, buying dips back towards the 0.8570 area is probably the safest scenario if the 0.8600 cracks.
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EURGBP Medium-term Technical Analysis
The daily time frame shows that the EURGBP pair has tested towards its key 200-day moving average, and also the top of a large falling price channel pattern.
These types of channel patterns are potent bullish reversal patterns. Should we see a powerful breakout if the EURGBP pair moves above the pattern. Watch out for an explosive 200-point upside move to quickly follow if the upper trendline and 200-day MA is broken.
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