The EURGBP pair is starting to look very bearish on the foreign exchange market as sterling picks up strength above the 1.3500 handle and the euro remains unable to break higher against most major currencies.
Since early last year the EURGBP pair has been trapped in a protracted and bearish downtrend and has a strong sell on any rallies back above the 0.8400 to 0.8500 price range.
This week the EURGBP pair has started to weaken back under the 0.8400 level and appears vulnerable to more heavy losses towards the 2021 trading low and possibly much lower.
Going forward, selling rallies back towards the 0.8380 to 0.8400 resistance zone looks a strong bet, especially with sentiment towards the EURGBP pair amongst the retail crowd turning very bullish.
The ActivTrader platform shows that bullish sentiment is at extreme levels, with some 91 percent of traders still expecting more upside in the EURGBP pair. This hints a major long squeeze.
One-way sentiment skews are rarely correct, so the current bullish is slightly worrying. The euro currency is lagging against many other major currencies due to the clear divergence in central bank policy. This may also suggest the single currency is out of favour with currency traders.
EURGBP Short-term Technical Analysis
The four-hour time frame shows that the EURGBP pair is technically bearish over the short-term with the price trading well below the neckline of a large head and shoulders price pattern.
Lower time frame analysis currently shows the EURGBP pair could drop towards the 0.8200 support zone, which is the overall target of the large head and shoulders price pattern.
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EURGBP Medium-term Technical Analysis
The daily time frame shows that the EURGBP pair is starting to break under a large descending price channel and could be about to move into a significantly lower price range.
Additionally, the Ichimoku indicator is generating a strong sell signal, with the Lagging line crossing under the Ichimoku cloud and trading right alongside the price under the cloud.
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