EURGBP Forex Forecast – Possible Countertrend Scenario?

EURGBP has been trending higher on its 4-hour chart, moving inside an ascending channel pattern and making its way towards the resistance around the .8800 major psychological level. For now, price seems to be pulling back to the mid-channel area of interest before resuming its climb.
A test of resistance could lead to another move back to the channel support since stochastic is already indicating overbought conditions. This means that bullish pressure is fading and that sellers could take control soon. If so, a selloff back to the .8400 handle could ensue.
The 100 SMA is also below the longer-term 200 SMA, signaling that the path of least resistance is to the downside. However, an upward crossover could draw more buyers to the mix and give EURGBP enough momentum to break past the channel resistance.
There were no major releases from both the euro zone and the UK earlier in the week, as most of the main event risks have already passed. Both the ECB and the BOE have decided to keep monetary policy unchanged, although the UK central bank seems more inclined to implement more easing in the near term.
UK public sector net borrowing data is due today while there are still no other reports lined up from the euro zone. Thursday has a speech by ECB Governor Draghi and a testimony by BOE Governor Carney later in the day, likely providing additional volatility for this pair.
On Friday, euro zone flash PMI readings are due, providing an early glimpse of business conditions in the region for September. Small declines are eyed for both Germany and France, likely weighing on the shared currency’s gains by then.
To contact the reporter of the story: Samuel Rae at
Previous articleDaily FX Trading Update: Trading Subdued Ahead of BOJ, FOMC, RBNZ
Next articleDragon’s Tale – Try your Luck in the Tower of Lights
Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.