EUR/GBP has witnessed a sudden reversal in trend, surging over 1% in a bullish rally. The move follows a period of bearish pressure but now signals a short-term reversal as bulls regain control.
Key Takeaways
- Short-term Bullish Reversal: The pair experiences a sharp upward move, indicating a potential short squeeze.
- Key Resistance at 0.8450: The upside could be capped near the cluster of Moving Averages at 0.8450.
- Support Levels: A pullback could find support around 0.8385, coinciding with previous July lows.
Technical Analysis
H4 Chart
- The H4 chart reveals a strong bullish breakout above key resistance zones. The surge from the 0.8320s level has driven the pair through multiple supply zones, including those highlighted around 0.8380.
- The move towards equilibrium at 0.8400 suggests that the pair is gaining momentum, with the premium zone near 0.8460 acting as the next critical level of resistance. This level aligns with a significant order block from early September.
- While the current bullish structure suggests further upside, traders should watch for a potential pullback, as the fast-paced ascent may lose steam near the premium zone.
H1 Chart
- The H1 chart confirms the short squeeze scenario with a decisive rally. The pair quickly overcame the 0.8320 resistance and now trades near the 0.8400-0.8450 range, where heavy resistance from previous supply areas is located.
- A potential retracement to the 0.8380-0.8390 level could offer an entry point for those looking to ride the bullish momentum, with the cluster of Moving Averages near 0.8450 serving as the immediate target.
Economic Data
- BoE Influence: The dovish tone from the Bank of England has contributed to the weakening of the Pound, allowing the Euro to capitalize on the short-term squeeze.
- ECB Outlook: With market anticipation growing around potential ECB rate cuts, any economic data from the Eurozone could further influence the next leg of the EUR/GBP move.
Trading Recommendation
- Short-term: Traders should monitor the resistance at 0.8450, where a temporary pullback is likely. Buying dips towards 0.8380 offers a favorable risk-to-reward setup, with the next major target at 0.8460.
- Long-term: While the bullish reversal is in play, the overall trend remains cautious as the cluster of Moving Averages and broader economic outlook may limit further gains beyond 0.8460.
Conclusion:
EUR/GBP’s sharp reversal places bulls back in control for the short term, with key resistance at 0.8450 potentially capping the current rally. Traders should remain vigilant for a pullback around the 0.8380 support level before considering further bullish entries.