The euro currency is testing towards the best levels in nearly one-month against the British pound as sterling weakness appears to be helping generate fresh buying interest for the EURGBP pair.
On the subject of sterling, the British pound is reeling lower against the US dollar currency this week as traders factor in that tapering is around the corner, with FED Chair Powell likely to announce the timing for taper next week.
The breakout to the upside appears to be genuine at this stage, and with notable bullish price divergence from the MACD indicator on the daily time frame is appears the EURGBP pair could be headed much higher.
It is noteworthy that the price divergence does not stop there. The CCI indicator also shows bullish price divergence extending towards the 0.8800 level. A move back inside a large triangle pattern has also happened.
I would suggest keeping a close eye on the EURGBP pairs 200-day moving average over the coming if the rally continues to gather pace. The key MA in question comes in around 0.8700, and will of course mark a trend change.
The ActivTrader platform shows that bullish sentiment has fallen significantly over recent days as the pair advances, with some 56 percent of traders still expecting more upside in the EURGBP pair.
With sentiment at manageable levels I fully expect the EURGBP pair to head even higher. We should also consider that if the GBPUSD pair continues to take out meaningful support levels it will only aid the ongoing upmove in the EURGBP.
EURGBP Short-term Technical Analysis
The four-hour time frame shows that the EURGBP pair has moved back inside a large triangle pattern, with the pattern located between the 0.8500 and 0.8680 levels.
Typically, when these types of patterns form it suggests that a big directional move is coming once the price move either side of the mention price pattern
With the price approaching the top of the pattern it appears that a bullish breakout is nearing, and the EURGBP pair could rally towards the 0.8850 level if the break happens.
EURGBP Medium-term Technical Analysis
The daily time frame shows that the EURGBP is exposed to further upside as the pair has formed large amount of bullish divergence during the recent multi-month decline towards the 0.8450 level.
Technical indicators such as the MACD and Commodity Channel Index are showing that bullish divergence extends up towards the 0.8800 level.