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The EURGBP looks braced for more downside as the pound rallied after the UK economy posted better than expected data. The British pound had already been outperforming the euro this week.
The UK Manufacturing PMI increased to 49.2 in February of 2023 from 47 in January, beating market forecasts of 47.5, preliminary estimates showed. Marking the highest reading in seven months, pointing to a further recovery in the manufacturing sector.
UK Production Volumes increased for the first time since June 2022, although the pace of expansion was only modest, prompted by recovering client demand and improving supply conditions.
Reflecting this, the latest survey signalled the fastest improvement in suppliers’ delivery times since June 2009, boosting the British pound broadly. Input cost inflation slowed and factory gate prices rose the least since January 2021
In terms of the technical, bearish patterns abound, and they continue to allude to the fact that a rally towards the 0.9000 level could be the monthly and quarterly price top for the EURGBP pair.
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 quite high, with some 59 percent of traders now expecting more downside in the EURGBP pair despite the recent rise from 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 bearish over the short-term with the price trading under its key 200-period moving average, around the 0.8840 area.
Looking at bearish patterns, an large head and shoulders pattern has formed after the recent rejection. This could also hint at a restest of that very important 0.8700 technical area.
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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 and has now formed a huge head and shoulders price pattern.
According to the trendline analysis the EURGBP pair is being drawn like a magnet to the 0.8700 level, as this is the location of the EURGBP pairs 200-day moving average.
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