EURGBP keeps on maintaining a positive mood for the third consecutive day while confirming a higher low at 0.8543 ahead of the Bank of England’s rate decision today at 11:00 GMT.
Specifically, the pair seems to be building the right shoulder of an inverse head and shoulders pattern (H&S), which theoretically is an encouraging sign that the previous downtrend to a ten-month low of 0.8503 is nearing its end. The 20- and 50-day simple moving averages (SMAs) are set to post their first bullish cross this year, and if that gets completed, the series of higher highs and higher lows in the short-term picture could gain extra credence.
In momentum indicators, the RSI has inched slightly above its 50 neutral mark and the stochastic oscillator has resumed its positive momentum. Meanwhile, the MACD has ticked above the zero line, but overall remains subdued.
Hence, buyers could sustain some caution until the price successfully enters the 0.8600 territory, and more importantly, closes above the 0.8650-0.8670 zone. Recovery efforts could be ruined due to the falling trendline from February’s high and the broken ascending trendline from March 2022 low in this area. Should the pair breach that wall, the 200-day SMA, which overlaps with the 50% Fibonacci retracement of the 0.8201-0.9249 upleg, could be another headache at 0.8725. A decisive close higher from there would brighten the short-term outlook, shifting the spotlight to the 0.8765 barrier and then to the 0.8800 psychological mark.
In the event the price slips below its 20- and 50-day SMAs at 0.8585, the spotlight will again fall on the 0.8500-0.8535 key support area. Another step lower from there would point to a failed H&S bullish formation, activating a dynamic decline towards the 0.8400-0.8425 territory. The descending line from October 2022 and February 2023 are contained within that zone, while the 78.6% Fibonacci mark is in the neighborhood as well.
Summing up, a bullish trend reversal could happen for EURGBP, but buyers may require further motivation, such as a consistent rally above the 200-day SMA, to increase their market exposure.