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EUR/GBP Price Forecast - Negative Sentiment May Test Recent Range Support

EUR/GBP Price Forecast - Negative Sentiment May Test Recent Range Support

Nick Cawley, Strategist

Euro and British Pound (EUR/GBP) Price, News, and Analysis:

  • EUR/GBP back below 0.8600 and eyeing range support.
  • IG client sentiment – a sharp decrease in short positions.

A range trade that we have been following for a few weeks, EUR/GBP, continues to throw up opportunities with both resistance and support holding firm. The 0.8560/0.8721 spread has been touched several times over the last two months with each test producing a turnaround in price action. The current spot price is now closing back in on support, with the move being given extra credibility by the short- and medium-dated simple moving averages and a series of lower highs from late April.

EUR/GBP Price Outlook: Multi-Week Trading Range Coming Under Pressure

The daily chart shows EUR/GBP opened today below the 20-dsma and for further weakness to be confirmed it also needs to close this level. Recent closes below this level have produced a break higher but these moves are becoming limited indicating the overall weakness of the pair. This weakness is being confirmed by the series of lower highs. Traders should keep a note of support at 0.8560 to see if it can still hold the current negative sentiment. Retail traders continue to build net-long EUR/GBP positions and cut back their net-short positions, a bearish contrarian signal (see below).

EUR/GBP Daily Price Chart (November 2020 – June 11, 2021)

EUR/GBP Price Forecast - Negative Sentiment May Test Recent Range Support

IG Retail trader data show 65.65% of traders are net-long with the ratio of traders long to short at 1.91 to 1.The number of traders net-long is 23.61% higher than yesterday and 2.38% higher from last week, while the number of traders net-short is 32.84% lower than yesterday and 15.78% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/GBP prices may continue to fall.Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/GBP-bearish contrarian trading bias

What is your view on EUR/GBP – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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