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EUR/GBP Technical Analysis: Topping Setup Taking Shape?

EUR/GBP Technical Analysis: Topping Setup Taking Shape?

Ilya Spivak,

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Talking Points:

  • EUR/GBP Technical Strategy: Flat
  • Euro gains most in two months vs. Pound after ECB policy announcement
  • Waiting for technical confirmation to sell in line with long-term outlook

The Euro moved swiftly higher against the British Pound amid aggressive seesaw volatility following the ECB monetary policy announcement. The single currency put in the largest daily advance in two months. Positioning now hints a Head and Shoulders topping pattern may be taking shape, though confirmation is absent thus far.

Near-term support (as well as the would-be H&S neckline) comes in at 0.7705, the 23.6% Fibonacci retracement. A daily close below this barrier paves the way for a test of the 0.7526-67 area, marked by the January 22 low and the 38.2% level. Alternatively, a push above trend line support-turned-resistance at 0.7839 sees the next upside threshold at 0.7928, the February 25 high.

We are keen to enter short EUR/GBP in line with our 2016 fundamental outlook. An actionable short entry signal is not present for the time being however, suggesting that taking a trade is premature. We will remain flat for now, waiting for prices to offer a more actionable selling opportunity.

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