EURGBP has been forming lower highs and finding support at the .7700 major psychological level, creating a descending triangle pattern on its 1-hour time frame. Price just bounced off the triangle support and might be due for a test of the triangle resistance around .7780.
If this holds as a ceiling, price could head back towards the triangle support yet again. The 100 SMA is below the 200 SMA, hinting that the path of least resistance is to the downside. Stochastic is already in the overbought area, indicating that buyers are getting exhausted and might be ready to let sellers take over.
Meanwhile, RSI is on middle ground and on the move up, which suggests that there may be some buying pressure left. In that case, an upside break from the triangle resistance could still be possible, taking price up by around 200 pips or the same height as the formation.
Event risks for this setup include the release of UK retail sales data, as analysts are expecting to see a 0.8% rebound in consumer spending. However, weaker than expected results might be seen since the UK has recently reported subdued wage growth.
There are no major reports due from the euro zone today, although the German PPI release might still provide some volatility. Apart from that, any shift in market sentiment could push this pair in a clearer direction.
So far, risk aversion has been in play due to dashed hopes of an oil production cap among OPEC and non-OPEC nations. The risk-off mood appears to be supporting the euro against its counterparts while weighing on the British pound.
Also, profit-taking could come into play since the weekend is approaching. Traders are cashing in on their gains from earlier in the week and might not be ready to push this pair out of consolidation while waiting for clearer market clues.
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