The euro currency has staged an unexpected surge higher against the British pound above the 0.8600 level, although no clear fundamental catalyst has been attributed to the move.
In terms of technicals, the EURGBP pair has broken above its 200-period moving average on the four-hour time, which is a classic signal that the short-term trend has now turned bullish.
Traders are wondering if a short squeeze of retail traders has taken place, however, this is appearing not be the case, as the ActivTrades Market Sentiment indicator shows that sentiment towards EURUSD pair is basically neutral.
Perhaps one reason why the EURGBP pair is rising is quarterly positioning. This could be causing a substantial shift in the euro currency right now, which brings us to the EURUSD pair.
The EURUSD pair is unusually strong right now and is rising on the foreign exchange market while the GBPUSD pair has posted two heavy down days this week. Again, no clear fundamental reason behind the divergence in sterling and the EURUSD pair.
Traders need to closely watch the 0.8660 level going forward, as this is former multi-year support, now turned critical resistance. Gains above this key technical region could cause the EURGBP pair to surge even more.
Taking a deeper looking at the ActivTrades Market Sentiment indicator, some 48 percent of traders are bearish, which means no clear short squeeze is underway. It is unusual to see such a one-way price advance take hold without a clear sentiment skew.
EURGBP Short-term Technical Analysis
The four-hour time frame shows that a bullish breakout from a falling wedge pattern around the 0.8590 level. According to the overall size of the bullish reversal pattern the EURUSD pair could rally towards the 0.8750 level in the short-term.
Traders should also note that the pairs 200-period moving average, around the 0.8590 level is critical support. Key resistance is now at 0.8660 and 0.8700.
EURGBP Medium-term Technical Analysis
The daily time frame shows that a retest of a key former range break out has taken place, following the recent advance towards the 0.8660 level.
According to technical analysis the EURUSD pair has not traded above the 0.8660 level since April 2020, meaning that it is extremely important what happens around this area over the coming days and weeks.