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EUR/GBP: A well-positioned technical reversal setup

by SuperiorInvest

It is setting up for a good reversal as we have an inverted head and shoulders pattern technical setup. But what makes this setup so attractive right now is that the market is very bearish on the Eurozone and more bullish (relatively) on the UK economy (as a whole). Rightly so, as the eurozone faces many growth problems and disinflationary pressures, while the UK's prospects look a little better. However, this is well known and has been priced in by the market since late 2023 and early 2024 and one of the reasons we have consolidated lower since mid-January. However, what if things change? What if UK inflation pressures continue to ease? Or perhaps the UK runs into some political risks?

EUR/GBP Chart

EURGBP's 38% retracement of the bearish move from late December 2023 to mid-February lows is at 0.8591, but the neckline of the pattern is at 0.8580. A break of this level would trigger the first round of buying stops, but a sustained break of .8600 would be overtly bullish.

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