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The euro currency continues to slide against the British pound as the overall bearish trend in the widely traded cross-pair shows few signs of stopping. Yesterday’s ECB meeting offered no respite for the EURGBP pair.
ECB Preside Lagarde talked down the eurozone economy and talked up the risks that the economy faces from erratic financial market moves. Lagarde noted that the central bank would not be raising rates any time soon, and that any pick-up in inflation would be modest.
This does not bode well for the EURGBP pair, particularly if the European Central Bank desire a weaker euro currency. Economic data from the manufacturing side has been performing well, however, as the ECB reiterated yesterday, COVID-19 risks prevail.
Many of Europe’s largest economies still face high levels of new infection, whereas the United Kingdom is doing much better, although it can hardly be said that the United Kingdom’s fundamentals are firing on all cylinders at the moment.
It is likely that the British pound will continue to outperform the euro currency, hence we may see more protracted weakness in the EURGBP cross rate. The technicals are also alluding the possibility of an extending price slump towards the 0.8350 and possibly the 0.8000 level this year.
Once thing is for sure, buyers are currently not feeling that the EURGBP pair is undervalued, and a major change in perception has taken place towards this cross pair. Buying interest looked muted above 0.9000, so it seems possible the new trading range for this pair will be between the 0.8500 to 0.8000 area could be forthcoming.
Another bearish factor supporting further EURGBP weakness is traders sentiment. According to the ActivTrades Market Sentiment indicator, 80 percent of traders are bullish towards the pair, despite the recent sell-off.
If history repeats itself this could mean further weakness the EURGBP pair as retail traders typically lean against established market trends. It appears that retail traders on the wrong side of this emerging move.
EURGBP Short-term Technical Analysis
The four-hour time frame shows that a bearish head and shoulders pattern is well and truly in play. The overall size of the pattern is suggesting that the EURGBP pair could be headed towards the 0.8300 area.
The neckline of the bearish pattern is a long way away from price at the moment, around the 0.8830 level, meaning that it is more likely than not that the target of the head and shoulders pattern will be reached.
Source by ActivTrader.
EURGBP Medium-term Technical Analysis
The daily time frame continues to show an extremely large megaphone pattern between the 0.9500 and 0.8000 levels. It appears that bears may be targeting the bottom of this typically neutral price pattern.
Megaphone patterns usually signify large trading ranges, followed by an extremely powerful technical breakout from the pattern. Traders should note that the size of the breakout is usually equal to the size of the megaphone pattern.
Source by ActivTrader.
