EURGBP could be in for a selloff, as double top FX reversal pattern formed on its 1-hour chart. The pair has already broken below the neckline around the .7250 minor psychological support and might be in for more losses.
However, stochastic is already indicating oversold conditions, which means that euro sellers are exhausted. This could lead to a bounce back to the broken neckline support before the pair continues its downtrend.
FX Reversal Forecast
If the selloff continues, EURGBP could fall by around 150 pips, which is roughly the same height as the chart pattern. Stronger selling pressure might even lead to a drop back to the previous lows near the .7000 major psychological support.
The shorter-term EMA is moving below the longer-term EMA, confirming the possibility of an extended selloff. If these indicators move further apart, it would reflect a strengthening bearish momentum. However, if the short-term EMA crosses back above the long-term EMA, buyers might jump back in action.
FX reversal catalysts for this trade include the UK CPI release, which might indicate another flat reading for the headline figure and a steady 1.2% reading for the core version of the report. Producer prices are slated to post a 0.5% decline, which could be indicative of weaker consumer price levels.
Stronger than expected data could provide support for the pound, as these might suggest that a rebound in inflation is taking hold. On the other hand, weaker than expected data could lead to a strong bounce for this pair, possibly back up to resistance at .7350 to .7400.
There are no top-tier reports due from the euro zone, although it seems that the Greek debt situation is still taking its toll on the shared currency. Any updates on this issue could still push euro pairs around, with negative news likely to drag the currency lower.
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