The EURGBP looks braced for more volatility the euro currency has already been outperforming the British pound due to strong gains in the single currency broadly on the FX market.
Normally, we see the British pound and the euro trading higher in tandem when the US dollar is falling, however, the euro has taken quite a substantial leg higher, while sterling has yet to true breakout.
In terms of the technical, bullish patterns, and they continue to allude to the fact that a rally towards the 0.9000 level could be on the cards, however, it really is a close call if this pair remains rangebound between 0.9000 and 0.8700.
Certainly both the UK and the eurozone share poor economic backdrops so it is difficult to determine which economy is actually in the worse shape right now if we compare both.
I think there is a strong case for a turnaround in this pair, especially if we consider that typically the British pound makes strong trending moves at times, we have yet to see such a move, but when it comes it could be explosive.
Sentiment metrics are highly suggesting that more upside is likely as the majority of traders are stacked short against the EURGBP pair.
The ActivTrader platform shows that bearish sentiment is very high, with some 75 percent of traders now expecting more downside in the EURGBP pair despite the recent rise towards the 0.8900 level.
Overall, this is still bullish for the EURGBP pair because traders are typically on the wrong side of the trade. Most of the time fading retail sentiment works well for trading purposes.
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 above its key 200-period moving average, around the 0.8840 area.
Looking at the Ichimoku indicator a bullish signal has been issued and we could shortly be seeing a very important technical test towards the 0.9000 resistance level.
EURGBP Medium-term Technical Analysis
The daily time frame shows that the EURGBP pair has recently failed at the upper end of its daily range, around 0.9000, and has now formed a huge head and shoulders pattern.
According to the trendline analysis the EURGBP pair is being drawn like a magnet to the 0.8900 level, as this is the location of the do or die moment where the pattern will either be negated or we will see a reversal.