EURGBP might be in for a reversal from its previous uptrend, as a head and shoulders pattern can be seen on its 4-hour chart. Price has yet to test the neckline support at the .7700 handle and break lower before confirming the potential downtrend.
The chart pattern is a little over 200 pips tall so the resulting breakdown could last by the same amount, taking EURGBP down to the .7500 handle or lower. However, if support at the .7700 mark holds, price could still form a range.
For now, the 100 SMA is still above the 200 SMA so the path of least resistance might still be to the upside, allowing the pair to resume the climb at some point. However, RSI and stochastic are heading south so price could follow suit.
Last week, the ECB unveiled a large expansion to their quantitative easing program, boosting monthly asset purchases from 60 billion EUR to 80 billion EUR. In addition, they lowered several interest rates but cited that they might not cut again in the near future.
As for the pound, the UK jobs release this week could be a catalyst, as the economy is expected to have added 8.8K jobs in February. This might be enough to keep the jobless rate steady at 5.1%. The average earnings index is expected to improve from 1.9% to 2.0% to show stronger wage growth.
Later on, the BOE will announce its interest rate decision but no actual changes are expected. Instead, traders could focus on the policymakers’ biases and whether or not any changes were made recently.