FOREX

EURGBP Flirts with Head and Shoulders Pattern in Short Term

EURGBP has been in a head and shoulders pattern over the last three weeks and a close below the neckline of the 0.8860 support could endorse this formation, suggesting a downside movement. The 20- and 40-period simple moving averages (SMAs) are acting as strong resistance lines for the bulls and the RSI is moving marginally below the 50 level. Also, the stochastic oscillator is heading south moving towards the oversold zone.

Immediate support is coming from the 50.0% Fibonacci retracement level of the up leg from 0.8670 to 0.9055 at 0.8862 near the neckline. A significant drop below these lines could open the door for further downside pressure towards the 0.8816 – 0.8825 region, encapsulating the 61.8% Fibonacci. Even lower, the 0.8805 support is the next target.

On the other hand, an increase above the 40-period SMA could meet the Ichimoku cloud and the flat blue Kijun-sen line currently at 0.8935. Above that, the upper surface of the cloud, which overlaps with the 23.6% Fibo of 0.8663, could attract attention ahead of the 0.9000 round number.

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Concluding, EURGBP is in a neutral mode since the direction is not clear in the 4-hour chart. A dip beneath 0.8860 could take the price further south.

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