EURGBP is edging higher today, battling with the 0.8635 level again. The aggressive sell-off from the February 2023 highs has probably halted as this pair has been hovering inside the 0.8504-0.8700 range for the past three months. The recent price action is giving rise to a plethora of patterns with the most prominent being a head-and-shoulders structure with the neckline currently residing at the 0.8580 area.
The momentum indicators appear equally range-bound at this juncture. The Average Directional Movement Index (ADX) is hovering below its 25-threshold, signaling a range-trading market, and the stochastic oscillator is trading sideways, a tad above both its moving average and midpoint, and seeking its next move. Interestingly, the RSI remains above its 50-midpoint and is trying to stage a move towards the July 20 highs. However, it seems to lack the necessary strength for such an advance.
Should the bulls ignore the muted signals, they would try to overcome the February 10, 2009 high at 0.8635 and the February 3, 2023 downward trendline, and gradually retest the busy 0.8668-0.8721 area. This is populated by the 61.8% Fibonacci retracement of the August 4, 2022 – September 26, 2022 uptrend, the June 15, 2022 high, and the respective 100- and 200-day simple moving averages (SMAs). This is a key area for short-term sentiment and if successfully broken, it would open the door for another upleg towards the 0.8800 region.
On the flip side, the bears are trying to take advantage of the developing head-and-shoulders structure by pushing EURGBP below the pattern’s neckline and the 50-day SMA. Such a move will probably then allow the bears to target the February 24, 2012 high at 0.8504, giving them the chance to record a new 2023 low. Even lower, the 0.8401 level looks like a plausible area for the bulls to set up their defense.
To sum up, EURGBP remains mostly directionless amidst the summer lull. The bears are trying to take advantage of a developing bearish pattern but their determination for a sizeable pullback will quickly be put to the test.
