The EUR/GBP is setting up for a good reversal as we have an inverted head and shoulder pattern technical setup. But what makes this setup so appealing at the moment is the market is very bearish the Eurozone and more bullish (relatively) the UK economy (as a whole). Rightfully so as the Eurozone faces a lot of growth issues and disinflationary pressure, while the UK prospects look a little better. However, this is very well known, and the market has discounted this from the end of 2023 and beginning of 2024 and one of the reasons we have consolidated lower since the middle of January. However, what if things change? How about UK inflation pressures continue to subside? Or perhaps the UK stumbles upon some political risks?
The EURGBP 38% retracement of the down move from end of December 2023 to the lows in the middle of February comes in at .8591, but the neckline of the pattern is at .8580. A break of this level would trigger the first round of buy stops, but a sustained break of .8600 would be outright bullish.
