The EUR/GBP pair has reversed course after filling the price gap formed during its June 10th plunge. A bearish two-bar reversal pattern emerged on July 1-2, suggesting a potential end to the recent recovery and a resumption of the downward trend.
Key Technical Indicators Point to Bearish Momentum:
- Gap Fill: The filling of the price gap between 0.8472 and 0.8490 (red shaded area) indicates a potential exhaustion of buying pressure.
- Reversal Pattern: The two-bar reversal pattern (light blue rectangle) further confirms the bearish sentiment shift.
- MACD Crossover: The Moving Average Convergence Divergence (MACD) on the 4-hour chart crossed below its signal line, reinforcing the bearish outlook.
Downside Targets and Potential Support Levels:
Given the broader downtrend and the bearish technical signals, the EUR/GBP pair is likely to continue its descent. A break below the June 28th low of 0.8457 would provide further confirmation, targeting the June 25th low of 0.8431.
Possible Bullish Reversal?
While the current outlook is bearish, a potential bullish reversal remains possible. A decisive break above the July 1st high of 0.8499 could invalidate the bearish scenario and lead to a continuation of the corrective rally. The 50-day Simple Moving Average (SMA) at 0.8517 would then become the next resistance level to watch.
Market Sentiment and Factors to Watch:
The recent weakness in the EUR/GBP pair is attributed to a combination of factors, including political uncertainty in France, a strengthening Pound Sterling, and a dovish European Central Bank (ECB). Traders should closely monitor upcoming economic data and political developments for further clues on the pair’s future direction.