EUR/GBP Inverted Head & Shoulders Pattern Creates Surge Higher

• EUR/GBP is making a bullish reversal via an inverted head and shoulders pattern (blue boxes). A bullish monthly candle could indicate the end of the bearish price swing.
• The EUR/GBP is moving sideways after a strong surge up. This is probably a wave 3-4 pattern (red).
• The main targets on the 4 hour chart are the Wizz 6 level at 0.8720, then 0.8775-0.88, followed by 0.8950-0.90.

Let’s review the critical patterns and targets.

Price charts and technical analysis

The EUR/GBP is moving sideways after a strong surge up. This is probably a wave 3-4 pattern (red). Let’s review:

1. The bearish correction respected the shallow 38.2-50% Fibonacci retracement levels, which is typical for a wave 4.
2. The bullish bounce showed strength (wave 1) and the bearish correction seems to be building an ABC pattern (purple).
3. A break above the 21 ema zone would confirm the bullish breakout (green arrows).
4. A break below the bottom however invalidates it (red circle).

On the 4 hour chart, price action is showing very strong bullish momentum, as indicated by our blue ECS SWAT candlesticks:

1. The divergence pattern between the bottoms (purple lines) indicated that a reversal was likely.
2. The breakout above the resistance trend line (dotted orange), 21 ema zone, and 144 ema close indicate that a strong wave 3 (orange) is taking place.
3. Intra-day continuation upward is possible in the zone above the Wizz 5 towards the Wizz 6 level.
4. Eventually a pullback via a bull flag (orange arrows) is expected to retest the Wizz 4 or 5 levels for a bounce up (green arrows).
5. Even a pullback towards the 144 ema or previous lows should act as support could indicate a bounce up. Only a break below the bottom invalidates it (red circle).
6. The main targets on the 4-hour chart are the Wizz 6 level at 0.8720, then 0.8775-0.88, followed by 0.8950-0.90.