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The EURGBP pair looks braced for more upside as the fundamentals, sentiment and the technicals continues to suggest that the upside is not done above the 0.8700 support level.
Yesterday’s ECB policy meeting clearly showed that the central bank is going to be far more aggressive towards rate hikes than the market was pricing in initially as the euro spoked broadly.
Moreover, the recent BoE meeting now highlights a clear policy divergence is starting to build towards the BoE and the ECB. It is therefore likely that more short-term upside is possible.
It is also a fact that the EURGBP pair is in a bull trend is still in play as the price bounced from e its 200-day moving average yesterday, meaning that bulls are currently in control over the short and medium-term.
Additionally, a critical moment is taking place. The technical suggest a make-or-break moment is coming as the EURGBP pair is either going to fall foul of a head and shoulders pattern or invalidate it.
Sentiment metrics are highly suggesting that a further gain is imminent as the majority of traders are stacked short against the EURGBP pair.
The ActivTrader platform shows that bearish sentiment is rising, with some 73 percent of traders now expecting more upside in the EURGBP pair despite the recent price rise.
Overall, this is very 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 slightly above its key 200-period moving average, around the 0.87100 area.
Looking at bearish patterns, and head and shoulders pattern has formed. This could hint at a make-or-break moment around 0.8800 marking a very important technical area.
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EURGBP Medium-term Technical Analysis
The daily time frame shows that the EURGBP pair has recently made a new multi-year higher high after igniting a large, inverted head and shoulders price pattern.
According to the overall size of the bullish price pattern the EURGBP pair has already met its full target and could be in the process of forming a head and shoulders pattern.
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