EUR/GBP Targets: Bearish Continuation Following Triangle Breakdown
Market Overview
The euro has faced renewed selling pressure against the British pound as traders react to mounting expectations of a potential interest rate cut by the European Central Bank (ECB) later this week. This sentiment is compounded by data showing negative inflation in Germany, the eurozone’s largest economy, last month. The bearish tone for the euro emerged early in the London session as market participants recalibrated their positions ahead of the ECB’s meeting. This scenario has set the stage for continued weakness in EUR/GBP.
Technical Analysis
On the two-hour chart, EUR/GBP has decisively broken below the support line of a triangle pattern, placing the pair firmly in a bearish outlook. The sustained breach of the 0.82688 level confirmed the sellers’ dominance, with subsequent action pushing the price through the first extended Fibonacci support at 0.82650.
Currently, the pair is testing a critical support zone at 0.82601. A successful breakdown below this level would open the door for further declines, with the next target situated at the key support level of 0.82548. Below this, additional selling pressure could extend towards lower untested levels, amplifying the bearish trajectory.
Oscillators Confirmation
Momentum indicators align with the bearish narrative. The Relative Strength Index (RSI) is trending downward and remains in bearish territory, indicating sustained selling pressure. Similarly, the Moving Average Convergence Divergence (MACD) has crossed into the negative zone, with its histogram deepening, signaling an intensification of downward momentum. Both the short-term and mid-term moving averages reinforce this outlook, as their negative slopes confirm the persistence of the prevailing trend.
Alternative Scenario
However, buyers may attempt a recovery. To neutralize the bearish momentum, they must reclaim the 0.82688 level and push the price back into the confines of the broken triangle. A sustained move above this point would shift focus to the key resistance level at 0.82828, where the triangle’s upper boundary resides. Breaking through this resistance would negate the bearish scenario and reestablish a bullish outlook.
Key Levels
- Resistance: 0.82650, 0.82741, 0.82828
- Support: 0.82601, 0.82548, 0.82485
Key Events to Watch
The eurozone faces a pivotal week, with Tuesday’s Eurogroup meeting drawing significant attention. This serves as a precursor to Thursday’s ECB meeting, where traders expect critical policy guidance amidst weak inflation data. The market remains on high alert for signals regarding the ECB’s approach to monetary easing. Meanwhile, sterling’s relative strength hinges on continued economic resilience in the UK, with no immediate catalysts in the near term.
Conclusion
EUR/GBP remains under bearish control, with the breakdown of the triangle pattern signaling further downside potential. The focus is on the 0.82601 support level, as its breach could open the path to additional selling. Conversely, a recovery above 0.82828 would negate the current bearish sentiment.
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